MCI, the telecommunications giant formerly known as WorldCom, has appointed JP Morgan and Lazard to sound out potential buyers.
It is understood that directors of the group, which recently emerged from the biggest bankruptcy in history, have yet to decide whether to sell the company as a whole or to hive off the successful business services division.
Speculation over a potential takeover of MCI has been prevalent since the company emerged from bankruptcy protection in April.
MCI’s business services unit would be attractive to companies that are trying to make a big impact in a market dominated by MCI and AT&T.
These companies include the “Bells” BellSouth, SBC Communications, Qwest Communications and Verizon Communications. They may be cautious about acquiring the consumer business because of regulatory hurdles.
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MCI is also examining whether a technology company such as IBM might be interested in acquiring the business services unit.
Sources added that bankers would also look outside the US for a potential buyer of the entire company.
In July MCI revealed that Leucadia National Corporation, a diversified conglomerate, was seeking to buy 50 per cent of its stock.
As well as interests in healthcare, banking, property and casualty insurance, and even vineyards, Leucadia owns WilTel, a telecom carrier that owns fibre-optic loops in cities including New York, San Francisco and Philadelphia.
A massive fraud was uncovered at MCI in the summer of 2002 and the company’s top brass, including Bernard Ebbers, former chief executive, were called before Congress to defend their actions. About $11 billion was eventually found to have gone astray in misrepresentations of expenses and revenues.
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In the aftermath, WorldCom shed 17,000 jobs in an effort to cut $1 billion in costs.
Since it emerged from bankruptcy, MCI has reduced WorldCom’s debt of $41 billion to between $3.5 billion and $4.5 billion. But it has continued to struggle in the face of fierce competition in the US long-distance telecommunications market, where AT&T remains the leader. MCI’s workforce has shrunk more than 20 per cent to 44,800 since the beginning of the year and is expected to plunge to 41,300 by the end of 2004.
Scott Sullivan, former chief financial officer, has pleaded guilty to securities fraud, conspiracy to commit securities fraud, and making false statements to the US Securities and Exchange Commission. He is awaiting sentencing.
Mr Ebbers is facing the same charges but has pleaded not guilty. The case goes to trial in November.
The company impressed analysts with second-quarter results this month and its promise to return $2.2 billion of cash to investors through a quarterly dividend of 40 cents a share.
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The WorldCom bankruptcy has cost $600 million in fees for lawyers, accountants and other advisers.