SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report May 29, 1998
(Date of earliest event reported) (May 28, 1998)
MCI COMMUNICATIONS CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 0-6547 52-0886267
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
1801 Pennsylvania Avenue, N.W., Washington, D.C. 20006
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(Address of Principal Executive Offices)
Registrant's telephone number, including area code (202) 872-1600.
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Item 5. Other Events.
On May 28, 1998, the Company announced that it had entered into a
letter of intent with Cable and Wireless plc to sell its Internet backbone
service business (the "iMCI Business"). The purchase price for the iMCI Business
is United States $625,000,000. The completion of the transaction is subject to
certain conditions precedent, including receipt of certain governmental
approvals including that of the Department of Justice ("DoJ"), and satisfaction
of the conditions precedent to the merger of the Company and WorldCom, Inc.,
which include receipt of approvals of the DoJ and the Federal Communications
Commission. The letter of intent will terminate if such governmental approvals
are not received by December 31, 1998.
Item 7. Exhibits.
Exhibit No. Description
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99(a) Press Release issued by the Company and Cable and Wireless
plc on May 28, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MCI COMMUNICATIONS CORPORATION
/s/ Edward G. Freitag
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Edward G. Freitag
Assistant Secretary
Date: May 29, 1998
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EXHIBIT INDEX
Exhibit No. Description
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99(a) Press Release issued by the Company and Cable and Wireless
plc on May 28, 1998.
Exhibit 99(a)
Cable & Wireless to Buy
MCI's Internet Backbone and ISP Service Business
Washington, D.C. and London, May 28, 1998 -- Cable & Wireless will acquire MCI's
entire Internet backbone service business for $625 million (385 million pounds)
in cash, the two companies announced today.
The transaction gives Cable & Wireless a premier Internet business in the
fastest-growing sector of the U.S. telecommunications market. It also addresses
anti-trust issues being examined by the U.S. Department of Justice and the
European Commission and, subject to approval by those authorities, should clear
the way for the swift approval of the MCI WorldCom merger.
The acquisition expands Cable & Wireless's already strongly growing portfolio of
global communications Internet services and enhances its prospects for growth in
the booming global Internet marketplace.
Richard H. Brown, Cable & Wireless Chief Executive, said: "The Internet is a
vital element of our growth engine. Already it is the world's fastest growing
telecommunications service, growing at more than 50 percent every year.
"This transaction catapults us into a leading role in the World League of
Internet and data traffic carriers. It gives us the scale and scope we need in
the United States to match our leading role in the rest of the world.
"Data has already overtaken voice in terms of traffic in the U.S. and across the
Atlantic and Pacific Oceans. The rest of the world is set to follow suit. With
this transaction, Cable & Wireless is ideally placed as the pace of the
communications revolution accelerates."
The terms of the deal are as follows:
- - MCI will sell to Cable & Wireless its Internet backbone service
business, comprising all of its 22 domestic nodes, 15,000
interconnection ports, more than 40 ongoing peering agreements, and
equipment dedicated to supporting the network including routers and
switches. These are key pieces of technology that will allow users to
access the Internet efficiently.
- - Cable & Wireless will acquire and assume support for MCI's contracts
with its Internet Service Provider (ISP) customers, whose business is
primarily re-selling Internet access. Today, MCI has more than 1,300
U.S. domestic and international ISP customers across 76 countries.
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- - In order to continue high standards of service for all customers, Cable
& Wireless and MCI have concluded an agreement to ensure the
fulfillment of all existing contractual arrangements with customers.
Initially, MCI will provide the underlying telecommunications transport services
supporting the Cable & Wireless backbone and will provide additional services as
required by Cable & Wireless. MCI will use Cable & Wireless's backbone services
to support its growing base of non-ISP customers.
MCI's residential and non-ISP commercial customers (who are not resellers of
Internet services) are not affected by this agreement, and MCI will continue to
provide non-Internet services to its ISP customers. Residential and commercial
customers will continue to receive MCI services exactly as they do today from
the same access facilities, under the same terms of their contracts and with
support from their existing account teams. For a period of at least two years,
underlying Internet services for MCI's existing customers will be provided on
the Cable & Wireless network. MCI will continue to provide Intranet, web-hosting
and other value-added Internet services to its customer base.
MCI has played a pioneering role in the development of Internet commerce,
communication and technology. In 1987, it was chosen to provide the high speed
fiber optic lines that formed the National Science Foundation's Internet
backbone. This ultimately gave way to today's competitive Internet backbone
services in the United States.
Cable & Wireless companies lead the market for Internet services in Hong Kong
and the Caribbean and this is a rapidly growing market for Cable & Wireless
worldwide. HongKong Telecom IMS is the leading Internet Service Provider in Hong
Kong with 235,000 Internet customers, increasing by 10,000 a month, and operates
a direct high-speed Internet access gateway to China. Optus (49 percent Cable &
Wireless) is one of the leading Internet Service Providers in Australia, one of
the world's most advanced Internet markets. Cable & Wireless Communications in
the UK is the fastest growing Internet Service Provider and is pioneering the
development of the interface between Internet and entertainment digital TV.
In the United States, Cable & Wireless, Inc. (a wholly-owned subsidiary of Cable
& Wireless) is a leader in the long distance and international communications
market, serving approximately 100,000 business customers in 50 states with a
range of voice, data, messaging and Internet services through 35 local sales
offices. Headquartered in Vienna, Virginia, near Washington, D.C., the company
has annual revenues in excess of $1 billion and 2,300 employees. It operates its
own digital fiber optic network between major cities in the USA which is
constantly expanding.
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"By divesting MCI's Internet backbone, we have eliminated any overlap with
WorldCom's Internet business," said Bert Roberts, MCI's chairman. "We have
formed an agreement that addresses anti-trust concerns with the MCI WorldCom
merger, ensures the continued delivery of quality Internet services for all our
customers and creates an exciting new opportunity for some of the industry's
most skilled Internet personnel."
Today's announcement is an agreement to acquire MCI's Internet backbone and ISP
service business which has assets of approximately $100 million (60 million
pounds) and projected turnover of approximately $220 million (135 million
pounds) annualized for the 12 months to 31 December 1998. The agreement provides
Cable & Wireless with certain revenue and traffic guarantees. Cable & Wireless
will gain the engineering and other expertise of certain MCI personnel currently
dedicated to the operation of MCI's backbone service business as well as sales,
marketing and support personnel who service MCI's ISP customers. MCI will fund
an incentive program to ensure that Cable & Wireless benefits from the
world-class skills of some of the industry's best Internet talent.
The MCI WorldCom merger is subject to approval by the Department of Justice
(DOJ), European Commission (EC) and the Federal Communications Commission (FCC).
Cable & Wireless's acquisition of MCI's Internet backbone service business
requires approval from the DOJ and the EC. This transaction will be completed
concurrently with the completion of the MCI WorldCom merger, which is expected
this summer.
In Cable & Wireless's annual results for the full year to 31st March 1998,
announced on 13 May, turnover (revenue) including Cable & Wireless's shares of
associates and joint ventures increased by 19 percent to $13.6 billion (8,302
million pounds). Group turnover increased 16 percent to $11.5 billion (7,001
million pounds). Total operating profit (the operating profit of the group and
its share of associates and joint ventures) before exceptional items rose 19
percent to $2.8 billion (1,684 million pounds). Pre-tax profit rose 54 percent
to $3.6 billion (2,184 million pounds). Pre-tax profit before exceptional items
grew 13 percent to $2.6 billion (1,597 million pounds). Exceptional items for
the year totaled $963 million (587 million pounds).
Cable & Wireless is one of the world's leading providers of global
telecommunications services with revenues of approximately $12 billion annually.
Its businesses provide 17 million customers in 70 countries with a complete
range of international, domestic and mobile communications. Cable & Wireless is
the world's third largest carrier of international traffic, provides mobile
communications in more than 30 countries and operates the world's largest
cableship fleet.
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MCI, headquartered in Washington, D.C., is a leading provider of local-to-global
communication services to business, government and residential users. The
company's fast-growing portfolio of advanced data and IT services accounts for a
quarter of MCI's approximately $20 billion in annual revenue. MCI operates one
of the world's largest and most advanced digital networks, connecting local
markets in the U.S. to hundreds of locations worldwide. MCI has agreed to merge
with WorldCom, one of the world's fastest-growing communications companies. The
merger will create MCI WorldCom, a company uniquely positioned in the U.S. local
and long distance markets as well as the global data and Internet markets.
