MCI to Take Up to $750 Million in Pretax Charges for Quarter

MCI Communications Corp. said Wednesday that it will take pretax charges of as much as $750 million for the fourth quarter to pay for job cuts, employee bonuses and the upgrade of computer systems, resulting in a loss, analysts said.

On an after-tax basis, the charges will reduce fourth-quarter results by about 60 cents a share, analysts said. Before the charges, the No. 2 U.S. long-distance phone company was expected to earn 14 cents a share.

Word of the charges comes not long after MCI agreed to be acquired by WorldCom Inc., the No. 4 U.S. long-distance phone company, for about $37 billion. It also comes amid wider losses in MCI’s fledgling local-phone operations and as MCI is trying to pump up growth in its long-distance business.

“MCI plans to announce three charges in the fourth quarter that should clean up the books a bit in anticipation of the merger with WorldCom next year,” said Frank Governali, an analyst with CS First Boston.

The pretax charges will include about $200 million for restructuring and job cuts; $200 million to $300 million for employee- and customer-retention programs; and $200 million to $250 million to upgrade MCI’s computer systems, analysts said.

Shares of Washington-based MCI fell 13 cents to close at $42.50; WorldCom shares fell 19 cents to $30.38, both in Nasdaq trading.

Last week, MCI cut as many as 1,500 jobs, or 2.7% of its work force, in a bid to boost earnings. Of those, as many as 1,000 were contractors who work on special projects, and 500 worked in MCI’s operations.