WorldCom, AT&T; Settle Dispute Over Network Fees

WorldCom Inc., seeking to exit bankruptcy protection in April, agreed Monday to give up $120 million in network fees owed by AT&T; Corp. as part of a settlement of disputes that included charges of improper call routing.

The rivals settled all claims against each other, including a racketeering and fraud lawsuit AT&T; filed against WorldCom in Virginia last year, they said in a statement. The network fee agreement was revealed in a U.S. Bankruptcy Court filing.

The settlement makes it easier for Chief Executive Michael Capellas to pull WorldCom out of Chapter 11 with a clean slate. The Justice Department is still investigating claims by competitors that Ashburn, Va.-based WorldCom, which is changing its name to MCI, improperly routed long-distance calls to avoid paying certain fees to terminate them on local phone networks.

“Both companies continue to cooperate with the U.S. attorney’s investigation,” an AT&T; spokesman said. A spokeswoman for the Justice Department, which opened its probe in July, declined to comment.

Shares of the reorganized WorldCom, which trade over the counter, fell 80 cents to $22. AT&T;’s shares fell 28 cents to $19.72 on the New York Stock Exchange.

The agreement is subject to approval by the U.S. Bankruptcy Court in Manhattan. A hearing is scheduled for March 2.

WorldCom is the No. 2 U.S. long-distance company after Bedminster, N.J.-based AT&T.; WorldCom filed for Chapter 11 in July 2002 because of an $11-billion accounting scandal.

After the U.S. attorney in New York began the probe of WorldCom’s call routing, the company said repeatedly that an internal inquiry found no wrongdoing. WorldCom reiterated in the court filing that its “call-routing practices are and were proper and legal in all respects.”

Separately, AT&T; said it settled its claims against Minneapolis-based Onvoy Inc., which also was named in the Virginia suit. Terms were not disclosed.