MCI Inc.

MCI Inc. was the final corporate identity of the telecommunications company previously known as WorldCom and MCI WorldCom. Its direct corporate predecessor was Long Distance Discount Services, Inc., established in 1983 in Mississippi. Under Bernard Ebbers, the company pursued an aggressive acquisition strategy, buying more than 60 telecommunications businesses and expanding from discounted long-distance calling into business data networks, Internet infrastructure, enterprise communications, and related services. It adopted the WorldCom name in 1995 and became one of the largest challengers to AT&T in the United States long-distance market. The company’s most consequential transaction was its 1998 acquisition of MCI Communications. Announced in 1997 at a value of approximately $37 billion, the combination created MCI WorldCom and joined WorldCom’s fast-growing domestic network with MCI’s established long-distance, international, and Internet operations. Regulatory approval required the divestiture of MCI’s internetMCI consumer Internet business. The enlarged company later attempted to merge with Sprint in a proposed transaction announced in 1999 and valued at approximately $129 billion. Antitrust concerns in the United States and Europe led the companies to abandon the proposal in 2000. WorldCom’s acquisition-led expansion and the collapse of the technology and telecommunications market exposed severe financial and governance weaknesses. Between 1999 and 2002, senior executives used improper accounting entries to classify ordinary telecommunications interconnection expenses as capital expenditures and recorded unsupported revenue entries. An internal audit investigation led by Cynthia Cooper uncovered billions of dollars in misstated accounts in 2002. The disclosure became one of the largest accounting scandals in United States corporate history, resulting in executive convictions, regulatory proceedings, investor settlements, and the company’s Chapter 11 bankruptcy filing in July 2002. After entering bankruptcy, the company changed its name to MCI in April 2003, moved its headquarters from Clinton, Mississippi, to Ashburn, Virginia, and adopted a new governance structure under chairman and chief executive Michael Capellas. It emerged from bankruptcy in 2004 as a substantially restructured business. The new MCI continued to provide long-distance, Internet, data, and enterprise communications services, and also partnered with Microsoft on a voice-over-IP product called MCI Web Calling. Verizon Communications acquired MCI in January 2006. The MCI operations were subsequently incorporated into Verizon Business, and MCI ceased to operate as an independent corporate brand.

MCI Inc. was the terminal name of a telecommunications enterprise whose corporate lineage began with Long Distance Discount Services, Inc., founded in 1983 in Jackson, Mississippi. Bernard Ebbers became chief executive in 1985. The company initially concentrated on discounted long-distance service, competing with the established regional and national telephone companies in a market that was becoming more open to alternative carriers. It expanded rapidly through acquisitions, including Advanced Telecommunications Corporation in 1992, Metromedia Communication and Resurgens Communications Group in 1993, IDB Communications Group in 1994, Williams Technology Group in 1995, and MFS Communications in 1996. The MFS transaction added UUNET, an important Internet-networking asset. The company adopted the WorldCom name in 1995. WorldCom’s strategy was based heavily on consolidation. In 1997 it announced an agreement to acquire MCI Communications for approximately $37 billion. The deal was completed in September 1998, creating MCI WorldCom. MCI contributed a major long-distance and international telecommunications business, while WorldCom brought a rapidly expanding network and a broad portfolio of acquired communications companies. To obtain approval, the combined company divested the internetMCI consumer Internet operation. WorldCom also acquired CompuServe’s network services division in 1998 and exchanged the CompuServe online service for America Online’s ANS network division. In 1999, MCI WorldCom announced a proposed $129 billion merger with Sprint. Regulators in the United States and European Union feared that the transaction would reduce competition, and the companies ended the proposal in July 2000. MCI WorldCom reverted to the WorldCom name later that year. The business deteriorated as the telecommunications market weakened and the company’s acquisition-driven model became harder to sustain. From approximately 1999 through 2002, senior executives used improper accounting to conceal declining performance. Interconnection expenses, referred to as line costs, were recorded as capital expenditures rather than current expenses, while unsupported entries were used to increase reported revenue. Internal auditors led by Cynthia Cooper investigated suspicious capital-account entries in 2002. The investigation identified billions of dollars in improper accounting, leading to the resignation or dismissal of senior finance executives, regulatory investigations, criminal prosecutions, and the withdrawal of the company’s 2001 audit opinion by Arthur Andersen. WorldCom filed for Chapter 11 protection on July 21, 2002. Bernard Ebbers had resigned earlier that year and was later convicted of fraud, conspiracy, and filing false regulatory documents. Other senior finance and accounting personnel also pleaded guilty or were convicted. During the bankruptcy, Michael Capellas became chairman and chief executive. On April 14, 2003, the reorganized company changed its name to MCI and relocated its headquarters from Clinton, Mississippi, to Ashburn, Virginia. The rebranding was intended to separate the reorganized enterprise from the WorldCom scandal and revive the better-known MCI identity. MCI emerged from bankruptcy in 2004 with a substantially altered capital structure and continued to sell long-distance, Internet, data, and enterprise communications services. Its reorganization involved settlements with regulators, investors, creditors, and other claimants, as well as extensive corporate-governance reforms. The company also pursued newer communications products, including a Microsoft partnership that provided voice-over-IP calling for Windows Live Messenger users. Verizon Communications acquired MCI in January 2006. The company’s operations were subsequently incorporated into Verizon Business, ending MCI’s existence as an independent telecommunications carrier and corporate brand.

1. 2006Verizon acquisition

   Verizon Communications acquires MCI and subsequently integrates its operations into Verizon Business.

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2. 2004MCI exits bankruptcy

   MCI completes its reorganization and resumes operations with a new capital and governance structure.

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3. 2003WorldCom becomes MCI

   The reorganized company changes its name to MCI and relocates its headquarters to Ashburn, Virginia.

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4. 2002Accounting fraud is uncovered

   Internal auditors uncover improper capitalization of line costs and unsupported revenue entries.

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5. 2002WorldCom files for bankruptcy

   WorldCom enters Chapter 11 protection following the accounting scandal and financial deterioration.

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6. 2000Sprint transaction terminated

   Regulatory opposition leads the boards of MCI WorldCom and Sprint to end their proposed merger.

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7. 1999Sprint merger proposed

   MCI WorldCom and Sprint announce a proposed combination that would have created the largest United States communications company.

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8. 1998MCI WorldCom is formed

   The WorldCom–MCI Communications merger closes, creating MCI WorldCom after required asset divestitures.

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9. 1997MCI merger announced

   WorldCom and MCI Communications announce a proposed merger valued at approximately $37 billion.

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10. 1996MFS Communications acquisition

    The acquisition of MFS adds UUNET and strengthens WorldCom’s Internet-networking capabilities.

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11. 1995WorldCom name adopted

    The company changes its name to WorldCom and continues expanding through telecommunications acquisitions.

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12. 1992Advanced Telecommunications acquisition

    WorldCom outbids larger rivals to acquire Advanced Telecommunications Corporation, accelerating its growth.

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13. 1985Ebbers becomes chief executive

    Bernard Ebbers is named chief executive as the company begins its long period of expansion in long-distance telecommunications.

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14. 1983Long Distance Discount Services is founded

    Bernard Ebbers and other investors establish Long Distance Discount Services, the corporate predecessor that later becomes WorldCom and then MCI.

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A large-scale alternative telecommunications carrier that challenged AT&T in long-distance services and later served business customers through voice, Internet, data-networking, and enterprise communications products.

• MCI long-distance servicesTelephony

  Long-distance voice calling was the company’s foundational commercial service. MCI positioned itself as an alternative to incumbent telephone carriers, offering discounted domestic and international calling to consumers and business customers. The service remained part of the company’s portfolio through its WorldCom and post-bankruptcy MCI periods.

• MCI Internet and network servicesInternet and data communications1996

  Through acquisitions including MFS and UUNET, the company developed extensive Internet backbone, access, and data-network capabilities. These assets supported business connectivity and network services as WorldCom expanded beyond traditional voice calling. The consumer internetMCI operation was divested during regulatory approval of the MCI merger.

• MCI enterprise communicationsEnterprise telecommunications

  MCI supplied business customers with voice, private networking, data transmission, Internet connectivity, and related managed communications services. This enterprise orientation became increasingly important after the company’s bankruptcy reorganization, when it focused on operating as a more disciplined business telecommunications provider.

• MCI Web CallingVoice over IP2005

  MCI Web Calling was a voice-over-IP service developed with Microsoft for Windows Live Messenger users. It allowed users to place telephone calls through the messaging platform. Following Verizon’s acquisition of MCI, the offering was renamed Verizon Web Calling.

• 2006Sell MCI to Verizon CommunicationsM&A

  MCI operated as a reorganized enterprise telecommunications company after emerging from bankruptcy.

  What changed. Verizon Communications acquired MCI and absorbed its operations into Verizon Business.

  Aftermath. MCI ceased to exist as an independent company and its standalone brand was phased out.

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• 2003Rebrand the reorganized company as MCIStrategy

  After the accounting scandal and Chapter 11 filing, the company needed to separate its reorganized operations from the WorldCom identity.

  What changed. WorldCom changed its name to MCI and moved its headquarters to Ashburn, Virginia.

  Aftermath. The MCI identity continued until Verizon acquired the company and integrated it into Verizon Business.

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• 2000Terminate the Sprint mergerM&A

  The proposed $129 billion merger faced competition concerns from United States and European regulators.

  What changed. The boards of both companies ended the transaction in July 2000.

  Aftermath. MCI WorldCom later returned to the WorldCom name, while the failed transaction left the company without the scale and strategic combination it had pursued.

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• 1998Complete the MCI Communications mergerM&A

  WorldCom sought scale in long-distance, international telecommunications, and Internet networking through the combination with MCI Communications.

  What changed. The companies completed the merger and operated as MCI WorldCom, while divesting internetMCI to address regulatory requirements.

  Aftermath. The transaction made the company one of the largest United States long-distance carriers, but also increased organizational complexity and acquisition-related exposure.

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• 2003Controversial Iraq reconstruction telecommunications contractControversy

  The company received a no-bid United States Department of Defense contract to build cellular service in Iraq during reconstruction. The award drew controversy because MCI was not widely known for building wireless networks.

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• 2002WorldCom accounting scandalControversy

  WorldCom executives concealed deteriorating earnings by recording telecommunications line costs as capital expenditures and using unsupported accounting entries to inflate revenue. An internal audit team led by Cynthia Cooper brought the issue to the board, triggering executive departures, regulatory investigations, criminal prosecutions, bankruptcy, investor claims, and extensive governance reforms.

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• 2006Verizon acquires MCI

  Verizon Communications acquired MCI, after which the business was integrated into Verizon Business.

  M&A
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• 2005Microsoft and MCI launch MCI Web Calling partnership

  MCI and Microsoft introduced a voice-over-IP calling service for Windows Live Messenger users.

  Product launch
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• 2004MCI emerges from bankruptcy

  The company completed its bankruptcy reorganization and continued operating under the MCI name.

  Bankruptcy
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• 2003WorldCom changes its name to MCI

  The reorganized company adopted the MCI name and moved its headquarters to Ashburn, Virginia.

  Leadership change
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• 2000MCI WorldCom and Sprint abandon proposed merger

  The companies terminated their proposed combination after United States and European regulators raised competition and monopoly concerns.

  M&ARegulation
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• 1998WorldCom completes MCI merger

  The merger was completed after regulatory review, creating MCI WorldCom and requiring the divestiture of MCI’s internetMCI business.

  M&A
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• 1997WorldCom announces acquisition of MCI Communications

  WorldCom and MCI Communications announced a proposed merger valued at approximately $37 billion.

  M&A
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1. MCI Inc.