MCI, US Sprint Post Big Gains in Profit, Sales
American Telephone & Telegraph’s leading competitors in long-distance telecommunications reported major profit gains Tuesday. MCI Communications said its second-quarter earnings more than doubled while U S Sprint, which has lost money for most of its history, was “solidly in the black” in its first-ever billion-dollar quarter.
MCI, the nation’s No. 2 long-distance company after AT&T;, posted net income of $150 million, up 129% from the same quarter a year earlier. Revenue rose 31% to $1.59 billion. For the six months, earnings reached $270 million, up 125%, on revenue of $3.09 billion, a 32% increase.
Meanwhile, third-ranked Sprint, which became profitable for the first time in the last quarter of 1988, continued its rebound. Sprint’s operating income reached $75.6 million for the first half of the year, contrasted with a $222.7-million loss for the first six months of 1988. Without disclosing a specific figure, Sprint also said it posted its first quarter with revenue exceeding $1 billion in the three months ended June 30.
That translated into improved results for Sprint’s parent, Kansas City, Mo.-based United Telecommunications, which also owns a string of local phone companies. United Telecom reported a second-quarter profit of $90.5 million, up 121%. Revenue increased nearly 19% to $1.85 billion. For the six months, profit totaled $166.9 million, up 118%, as revenue increased about 17%, to $3.62 billion.
“While the market for long-distance services is increasingly competitive, we’re better equipped to compete on all fronts than ever before,” William T. Esrey, United Telecom’s president and chief executive, told a New York meeting of security analysts.
The increases by both MCI and Sprint were close to Wall Street’s expectations, said Stuart Crane, an analyst with Gruntal & Co. in New York. But Crane warned that AT&T; can be expected to compete more vigorously since the Federal Communications Commission increased the company’s flexibility in setting general prices and in tailoring special packages of services for big business, effective July 1.
Although he expects both MCI and Sprint to remain profitable, Crane predicted that they and other long-distance carriers will find it tougher to make major inroads into AT&T;'s business. “The past is prologue,” he said.
Robert B. Morris III, an analyst with Goldman, Sachs & Co., called MCI’s growth “very attractive,” reflecting new products and new major customers, but said Sprint’s results fell slightly below his forecast.
In stock trading Tuesday, MCI closed at $38.625, off $1.25, and United Telecom closed at $68.625, down 37.5 cents.
AT&T; is scheduled to report second-quarter results Thursday.