MCI Worldcom Inc. (Nasdaq: WCOM) said Thursday third quarter earnings were $1.1 billion, or 56 cents a share, beating First Call's prediction of 54 cents a share as demand for the company's more cost-effective Internet services continued to rise.
Shares closed at 77 9/16 Wednesday, after dipping since MCI Worldcom confirmed its merger with Sprint. The combined company, to be called WorldCom, will be the result of the largest merger ever, expected to close in the second half of 2000
Net income, excluding Embratel and MCI merger related costs, was $359 million, or 19 cents per common share for the third quarter 1998. Revenue, excluding Embratel, were $8.5 billion, up 11 percent as compared with $7.7 billion, on a pro forma basis, for the third quarter of 1998. MCI added that service interruptions on a frame relay network platform in the third quarter impacted revenues by $29 million in service credits. Including Embratel, third quarter 1999 revenues were $9.2 billion.
The company said better than expected cost savings from the MCI merger, as well as improving economics drove the improvement; as the company's revenue source shifts to "distance-independent" revenues, they accrue no access charges imposed by local exchange carriers (ILECs).
More than 40 percent of overall revenue came from communications services revenues - of which data, Internet and international are the three fastest growing areas.
While voice traffic is becoming a smaller piece of total network volume, Internet usage increased 83 percent. Internet and data services consume much larger units of incremental bandwidth and yield higher gross margins due to network efficiencies, such as the access charges from ILECs.