MCI’s Third-Quarter Profit Dives 57%

MCI Communications Corp. on Thursday reported that third-quarter profit fell 57%, before charges that gave it a final loss, as it began formal talks with three companies seeking to buy the long-distance telephone company.

MCI’s profit, before charges, fell to $132 million from $304 million in the year-earlier period. Losses in its fledgling local-phone business widened, while growth slowed at its long-distance business, the nation’s second-largest, with 20% of the market, the company said.

Washington, D.C.-based MCI entered talks Thursday with WorldCom Inc., British Telecommunications and GTE Corp., the latest bidder, with an all-cash offer of $28 billion on Oct. 15.

MCI’s market share makes it attractive, though quarterly sales rose 2.9%, to $4.82 billion, less than half the growth rate of the previous quarter. In addition, its local service isn’t expected to generate a profit soon.

“There is one hell of a turnaround job for whoever gets MCI,” said Anna-Maria Kovacs, an analyst at Janney Montgomery Scott Inc. “This marks two extraordinarily poor quarters.”

On a per-share basis, MCI’s earnings fell to 19 cents, a penny more than analysts’ average estimate. In the year-earlier quarter, the company earned 44 cents a share.

In the most recent quarter, charges of $314 million, or 45 cents a share, primarily to end certain contracts in its long-distance business, resulted in a loss of $182 million, or 26 cents. There were no charges or gains in the year-ago quarter.

Expenses, which rose almost eight times faster than sales, contributed to the profit decline. In the third quarter, MCI’s total operating expenses rose 22%, to $5.01 billion from $4.10 billion.

MCI’s long-distance revenue fell 0.2%, to $4.34 billion from $4.27 billion, as it passed through lower prices from regulation and ended certain contracts to sell phone time to other carriers.

MCI isn’t growing as fast as rivals AT&T; Corp., the No. 1 U.S. long-distance provider, and No. 3 Sprint Corp. MCI’s long-distance volume, a key measure of the minutes of use on its network, rose 6%. That’s well behind 14% growth at Sprint and 10% at AT&T.;

MCI’s shares fell 78 cents to close at $37.72 in Nasdaq trading.