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WorldCom Sees Income Tumbling

August 12, 2003|From Reuters

WorldCom Inc., the No. 2 U.S. long-distance telephone carrier, said Monday that it could see its net income fall $36 million to $250 million over three years, depending on the length of its ban from winning new government contracts.

If the company fixes by Nov. 1 concerns about internal controls and business ethics raised by the government, WorldCom said its net income would fall $8 million to a projected $527 million this year.

Net income for 2004 would be reduced $16 million to an estimated $1.06 billion and $12 million to $1.18 billion in 2005, WorldCom said in a filing with the Securities and Exchange Commission.

However, the company said if it cannot be recertified as a responsible government contractor until July 1, 2004, net income would fall a projected $8 million in 2003, $105 million next year and $137 million in 2005, according to the filing.

WorldCom, embroiled in an $11-billion accounting scandal that forced the company into bankruptcy protection, last month was suspended from receiving new contracts pending a review of whether the company should be barred for up to three years. The General Services Administration, which awards government contracts, found the Ashburn, Va.-based company, which offers telecommunications services to agencies including the Defense Department, had not adequately addressed its material accounting and business ethics weaknesses.

The company, which receives roughly $1 billion in revenue from government contracts, has said it is addressing the issues raised. The ban does not affect existing contracts.

WorldCom, which plans to change its name to MCI after emerging from bankruptcy protection, said last week that its revenue could fall as much as $427 million if not recertified until July 1, 2004.

The U.S. Bankruptcy Court for the Southern District of New York has scheduled a Sept. 8 hearing to consider WorldCom's plan to emerge from bankruptcy protection.

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