MCI Third Quarter 2004 Results. Supplemental Information November 4, 2004

Transcription

1 MCI Third Quarter 2004 Results Supplemental Information November 4, 2004

2 Safe Harbor Statement This presentation includes certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations. Factors that may cause actual results to differ materially from management's expectations include economic uncertainty; the effects of vigorous competition, including price compression; the impact of technological change on our business, alternative technologies, and dependence on availability of transmission facilities; risks of international business; regulatory risks in the United States and internationally; contingent liabilities; uncertainties regarding the collectibility of receivables; risks associated with debt service requirements and our financial leverage; uncertainties associated with the success of acquisitions; and the ongoing war on terrorism. More detailed information about those factors is contained in the Company s filings with the Securities and Exchange Commission, including its 10-K under Risk Factors. This presentation references certain financial measures which are deemed to be non-gaap. The Company believes that the inclusion of these measures is important because it provides readers of the report a better view of its operating results. For a reconciliation of any non-gaap financial measure, please visit our web site, 2

3 Our Value Proposition Extensive IP-Centric Product Portfolio Industry- Leading Service Quality Expansive Global Network Tenured Sales Force Strong Customer Relationships 3

4 3Q04 Revenue by Segment Enterprise Markets $1.2 Billion 23% Global Accounts Government System Integrators Hosting Total MCI $5.1 B U.S. Sales & Service $2.2 Billion 44% Commercial Accounts Small & Mid-Sized Business Mass Markets Skytel International &Wholesale $1.6 Billion 33% International Wholesale 4

5 3Q04 Financial Highlights Revenues totaled $5.1B, down 3% sequentially and 15%YOY Sequential revenue in key business segments continues to stabilize Company recorded previously announced $3.5B of pre-tax, non-cash impairment charges Operating loss totaled $3.4B, compared to $77M of operating income in 3Q03 Excluding impairment charges, operating income would have been $121M EBITDA 1 reached $621 million, excluding impairment charges, up from $606M in 2Q04 Normalized for severance and reorganization costs, EBITDA was $644M YTD reported EBITDA was $1.5B or $1.8B normalized for severance and reorganization Cost structure better aligned with revenue Access costs fell to $2.6B, down 14% YOY and down nearly $100M sequentially Costs of products and services declined 3% YOY SG&A totaled $1.2B, down 24% YOY and 5% sequentially Severance totaled $12M Depreciation and amortization totaled $493M, down from $602M in 3Q03 due to impairment charges 5 1. EBITDA is calculated as operating (loss) income adjusted to remove the effects of impairment charges, depreciation and amortization, and loss on property dispositions.

6 Revenues in Key Business Segments $6,000 Total MCI $5,000 $4,000 $3,000 $2,000 $3,000 Enterprise $3,000 US Sales & Service $3,000 International & Wholesale $2,500 $2,500 $2,500 $2,000 $2,000 $2,000 $1,500 $1,500 $1,500 6

7 Extending IP Products Private IP continues to be fastest growing service Private IP customer base tripled in size YOY Strong IP service installs, coupled with improved Frame Relay and Private Line churn, yields positive third-quarter net installs Continued global Private IP expansion Added nodes in 13 cities in four new countries Upgraded MCI Advantage to support capabilities at fixed locations One of industry s first Voice over Internet Protocol (VoIP) solutions to do so Secure Interworking Gateway recognized in Forrester IP VPN Wave Analysis Forrester found MCI s VPN strategy and vision to be best-in-class 7

8 Launching New IP Products Introduced service to manage customer LAN switches Extends MCI's network management capabilities deeper into the enterprise Began deployment of Smart Monitoring infrastructure Provides improved proactive monitoring and performance reporting for Enterprise hosting customers Announced Converged Packet Access (CPA) technology strategy and a series of Ethernet capabilities New, nationwide Private Line Ethernet Services Addition of new speeds to MCI s Metro Ethernet Service Expansion of MCI s Dedicated Ethernet Service from five to 25 markets Launched Managed Personal Firewall Provides protection of centrally managed personal firewall to end user PCs Closed first sale of Dedicated Enterprise Storage Area Network 8

9 Starting to See More IP-Based New Business Select Enterprise Wins Carlson Companies Allianz Diageo via IBM HP Kuehne Nagle Mattel Nestle USA Pioneer Select Commercial Wins Resun Leasing O Reilly Automotive Hilex Poly Company Quintiles Transnational HP overview Five-year, $125 million agreement Provides HP with services including secure Internet remote access and enhanced contact centers MCI named one of the selected providers for the HP Managed Services Systems Integrators for Telecommunications Program Hilex Poly overview (industry leading maker of plastic bag and film products) Provides Hilex with MCI s Internet Dedicated, Managed Content Audio & Net Conferencing Solutions Long distance and toll-free voice 9

10 Access Cost Improvements on Target Total MCI $3,000 $2,500 $2,000 $1, Telco % Revenue 10

11 Strong Results in SG&A Reduction $1,800 Total MCI 4 $1,600 $1,400 $1,200 $800 $600 $400 35% 3 25% 2 15% 5% SG&A % Revenue Enterprise US Sales & Service International & Wholesale $900 $800 $700 $600 35% 3 25% $900 $800 $700 $600 35% 3 25% $900 $800 $700 $600 35% 3 25% $400 15% $400 15% $400 15% $300 $300 $300 $100 5% $100 5% $100 5% 11

12 EBITDA Improving $800 Total MCI 14% $700 12% $600 $400 $300 $100 8% 6% 4% 2% SG&A % Revenue Enterprise US Sales & Service $350 2 $350 2 $350 18% $300 18% $300 $300 16% 16% $250 $250 14% 14% $250 12% 12% $150 $150 $150 8% 8% $100 6% $100 6% $100 $50 4% $50 4% $50 2% 2% ($50) -2% ($50) -2% ($50) International & Wholesale 2 18% 16% 14% 12% 8% 6% 4% 2% -2% -4% 12

13 Cash Position Remains Strong ($ billions) 2004 Beginning Cash (w/o Embratel) $5.6 Sources: Operating and investing activity cash flow $1.2+ Total Sources $6.8+ Uses: Dividends (.2) Emergence Claims ($1.5) Projected Cash, Dec 31, 2004 $5.1+ Estimated Shares Outstanding 319MM 13