Higher Costs, Price Cuts Contribute to MCI’s Loss

MCI Communications lost $502.5 million in the last three months of 1986 because of a huge charge for writedowns and restructuring, the No. 2 long-distance phone company reported.

The big loss was roughly in line with analysts’ expectations. Washington-based MCI has been hurt by rising costs and a series of price cuts by market leader American Telephone & Telegraph, which also lost money.

MCI’s profit and revenue “will remain under pressure” this year, said Bert Roberts Jr., MCI’s president and chief operating officer.

MCI’s $502.5-million loss in the fourth quarter contrasted with a slim net profit of $8.3 million in the year-earlier quarter. Revenue rose 28% to $920.1 million from $721.4 million.

For all of 1986, MCI said it lost $448.4 million, compared to net income of $113.3 million in 1985. Revenue rose 41% to $3.59 billion from $2.54 billion a year earlier.

MCI’s fourth-quarter results included a pretax charge of $584.9 million from a writedown in the book value of equipment and the creation of a reserve for the expenses of a restructuring plan aimed at cutting costs. There was also a pretax gain of $39.1 million from antitrust settlements.

Not counting the one-time items, MCI said it had a pretax operating loss of $30.6 million in the quarter.