SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
October 5, 1999
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MCI WORLDCOM, INC.
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(Exact name of registrant as specified in its charter)
Georgia
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(State or other jurisdiction of incorporation)
0-11258 58-1521612
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(Commission File Number) (IRS Employer Identification No.)
500 Clinton Center Drive, Clinton, Mississippi 39056
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(Address of principal executive offices) (Zip Code)
(601) 460-5600
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(Registrant's Telephone Number)
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2
Item 5. Other Events.
On October 5, 1999, MCI WORLDCOM, Inc. and Sprint Corporation gave a
presentation to analysts regarding the proposed merger (the "Merger") of MCI
WorldCom and Sprint pursuant to an Agreement and Plan of Merger dated as of
October 4, 1999.
A copy of the presentation to analysts, dated October 5, 1999,
regarding the Merger is attached as Exhibit 99.1 hereto and is incorporated
herein by reference.
Exhibit 99.1 to this current report on Form 8-K contains
forward-looking statements with respect to the financial conditions, results of
operations and businesses of each of MCI WorldCom and Sprint and, assuming the
completion of the Merger, a combined MCI WorldCom/Sprint, including statements
relating to: (a) the cost savings and accretion to reported earnings that will
be realized from the Merger; (b) the impact on revenues of the Merger; and (c)
the restructuring charges expected to be incurred in connection with the Merger.
These forward looking statements involve certain risks and uncertainties.
Factors that may cause actual results to differ from those contemplated by such
forward-looking statements include, among others, the following possibilities:
(a) expected cost savings from the Merger cannot be fully realized or realized
within this expected time-frame; (b) revenues following the Merger are lower
than expected; (c) competitive pressure among companies in the communications
industry increases significantly; (d) costs or difficulties related to the
integration of the businesses of MCI WorldCom and Sprint are greater than
expected; (e) general economic conditions, either internationally or nationally
or in the states in which the combined company will be doing business, are less
favorable than expected; or (f) legislation or regulatory requirements or
changes adversely affect the business in which the combined company would be
engaged.
Such forward-looking statements speak only as of the date on which
such statements were made, and MCI WorldCom undertakes no obligation to update
any forward-looking statement to reflect events or circumstances after the date
on which any such statement is made to reflect the occurrence of unanticipated
events.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit Description
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99.1 Analyst Presentation Materials dated October 5, 1999, regarding the
Merger.
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3
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 WORLDCOM, INC.
Date: October 15, 1999 By: /s/ Scott D. Sullivan
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Name: Scott D. Sullivan
Title: Chief Financial Officer
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4
EXHIBIT INDEX
Exhibit Description
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99.1 Analyst Presentation Materials dated October 5, 1999, regarding the
Merger.
[LOGO]WORLDCOM
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"Safe Harbor" Disclosure
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The following presentation materials contain forward-looking statements that
involve risk and uncertainty, including financial, regulatory environment and
trend projections
Although the Company believes that its expectations are based on reasonable
assumptions, it can give no assurance that its expectations will be achieved
[LOGO]Sprint [LOGO]MCI WORLDCOM
<PAGE>
"Safe Harbor" Disclosure
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All subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Statements highlighted in your presentation slides
and SEC filings by the Company
[LOGO]Sprint [LOGO]MCI WORLDCOM
<PAGE>
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Bernard J. Ebbers
President
and
Chief Executive Officer
[LOGO]Sprint [LOGO]MCI WORLDCOM
<PAGE>
- --------------------------------------------------------------------------------
[LOGO]MCI WORLDCOM
[LOGO]Sprint
... A World Class Combination
<PAGE>
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[GRAPHIC OMITTED]
[LOGO]Sprint [LOGO]MCI WORLDCOM
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Terms of the Merger
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o Stock for stock transaction
o Sprint FON common receives $76 in WorldCom common stock
o Collar of $62.15 to $80.85
o Sprint PCS receives 1.0 share of WorldCom PCS tracking stock plus 0.1547
shares of WorldCom common stock
[LOGO]Sprint [LOGO]MCI WORLDCOM
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Pricing Structure
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[GRAPHIC OMITTED]
For Sprint FON
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Fixed price of $76 within a band of prices for WorldCom of $62.15 to $80.85 and
a floating price outside the band
For Sprint PCS
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One WorldCom PCS tracking stock plus 0.1547 shares of WorldCom common stock
[LOGO]Sprint [LOGO]MCI WORLDCOM
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Merger Benefits are Compelling
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Innovative deployment of new
technologies will bring benefits to all
customers
Better utilization of combined networks
drives tremendous cost savings
[LOGO]Sprint [LOGO]MCI WORLDCOM
<PAGE>
Overview of Transaction
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o Parent-parent merger
o All stock transaction
o Post-merger ownership including PCS
- WorldCom 55%
- Sprint 45%
o Board composition
- WorldCom 10
- Sprint 6
[LOGO]Sprint [LOGO]MCI WORLDCOM
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Why This Deal?
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o WorldCom obtains:
- Scope to create full range of services
- Scale to develop broadband networks
- Cost savings to fund continued investment
o Sprint obtains
- Access to international end-to-end network
- Access to local-national CLEC
- Scale
- Synergies
[LOGO]Sprint [LOGO]MCI WORLDCOM
<PAGE>
Highly Complementary Transaction
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[GRAPHIC OMITTED]
[LOGO]Sprint [LOGO]MCI WORLDCOM
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Consumer Benefits
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o Aggressive, innovative competitor to AT&T / MBOCs with full range of
services
- Friends & Family - PCS
- On-Net - ION
o Tremendous cost savings drive pricing flexibility
- 5 cents Everyday
o Entirely new broadband system
- National CLEC
- MMDS
o Access to end-to-end seamless global services
[LOGO]Sprint [LOGO]MCI WORLDCOM
<PAGE>
Impact of Mega-BOC Entry
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o Mass market is compressed
- CA, NY, TX, FL: 20-21%
- Add PA, NJ, IL: 28-29%
o MBOC entry possible in each state in 2000
o MBOCs likely to gain 25+% upon entry
o MBOC access charge subsidy
[LOGO]Sprint [LOGO]MCI WORLDCOM
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The Opportunity for Wireless
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[GRAPHIC OMITTED]
o Enhances voice service offerings for consumers, and increasingly business
customers
o Ideally positions the Company for the coming wireless data explosion with
Sprint PCS, SkyTel, and Metricom
[GRAPHIC OMITTED]
[LOGO]Sprint [LOGO]MCI WORLDCOM
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Broadband Access ...
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The New Competitive Landscape
o Over 40,000 buildings connected with high capacity circuits
o MMDS licenses covering over 50 million households
o DSL deployment in over 1,500 MBOC central offices
Proven leadership in broadband
deployment
[LOGO]Sprint [LOGO]MCI WORLDCOM
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Scale is Critical
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o M&A transactions since WorldCom - MCI:
- AT&T - TCI $76 B
- SBC - Ameritech $72 B
- Bell Atlantic - GTE $71 B
- Vodafone - AirTouch $66 B
- AT&T - MediaOne $63 B
- Qwest - US West $48 B
- WorldCom - MCI $44 B
Source: SDC
[LOGO]Sprint [LOGO]MCI WORLDCOM
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Timing of Transaction
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o WorldCom and Sprint shareholders approve merger
o Regulatory clearances
o Expected to close second half 2000
[LOGO]Sprint [LOGO]MCI WORLDCOM
<PAGE>
Today's Value of $100 Invested in 1989
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[The following table was depicted as a bar graph in the printed materials.]
MCI WorldCom $6,105
BellSouth $ 462
[LOGO]Sprint [LOGO]MCI WORLDCOM
<PAGE>
Summary
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Increased scale translates into shareholder value through:
o Cost savings
o More efficient deployment of capital
o Innovative technologies
o Expanded sales opportunities
[LOGO]Sprint [LOGO]MCI WORLDCOM
<PAGE>
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William T. Esrey
Chairman
and
Chief Executive Officer
Sprint Communications Company
[LOGO]Sprint [LOGO]MCI WORLDCOM
<PAGE>
Merger Provides:
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Each company with the complementary assets needed to compete in a market where
scale is increasingly critical for survival Benefits to:
- Sprint -------> Local access and global reach
- WorldCom -------> Wireless and local operations
- Customers -------> Value and innovation
[LOGO]Sprint [LOGO]MCI WORLDCOM
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The World Continues to Change
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o From a pin drop -- about clarity across distance
o Towards "distance independence"
o From one-dimensional products to customer-oriented service bundles
[LOGO]Sprint [LOGO]MCI WORLDCOM
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Premier Wireless Technologies
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[GRAPHIC OMITTED]
o Combines best wireless infrastructure with premier wireline networks
o Positions the Company to lead industry for wireless data access
o Provides nationwide broadband access alternative through MMDS and DSL
deployment
[LOGO]Sprint [LOGO]MCI WORLDCOM
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Fixed Wireless Access Markets
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[GRAPHIC OMITTED]
Broadband access alternative for over 50 million households
[LOGO]Sprint [LOGO]MCI WORLDCOM
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Nationwide Coverage
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[GRAPHIC OMITTED]
o 4 million subscribers
o 293 markets - 170 million covered POPs
o Over 11,000 cell sites
[LOGO]Sprint [LOGO]MCI WORLDCOM
Wireless Traffic Forecast Model
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[GRAPHIC OMITTED]
By 2003, data traffic will be 45% of wireless traffic
Source: Merrill Lynch
[LOGO]Sprint [LOGO]MCI WORLDCOM
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Merger Provides:
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o Right networks, right assets, right management at the right time
- End-to-end global networks
- Wireless, wireline
- Domestic to global
- Broadband, narrowband
o Additional scale enhances industry-leading cost structure
- Enables more innovation
- Drives value for customers
o Superior product set
[LOGO]Sprint [LOGO]MCI WORLDCOM
<PAGE>
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Scott D. Sullivan
Chief Financial Officer
[LOGO]Sprint [LOGO]MCI WORLDCOM
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Business Plan Remains On Track
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o Strong revenue and EPS growth
o Expanding margins through synergies and mix shift
o MCI fully integrated -- cost savings ahead of plan
[LOGO]Sprint [LOGO]MCI WORLDCOM
<PAGE>
Financial Structure Rationale
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o Purchase accounting and issuance of a tracking stock provides WorldCom
with the best economic value and financial flexibility
o Maximize value through issuing minimum number of shares
o Economics, not accounting, drove deal
[LOGO]Sprint [LOGO]MCI WORLDCOM
<PAGE>
Financial Highlights
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o The transaction is expected to be essentially non-dilutive to cash
earnings
o The financial structure provides a logical path to wireless -- today
[LOGO]Sprint [LOGO]MCI WORLDCOM
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Logical Path to Wireless
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o WorldCom PCS shares will be convertible into WorldCom common shares:
- After 11/23/01 at a 10% premium
- After 11/23/02 at relative fair value
o WorldCom PCS turns:
EBITDA positive in 2000
EBIT positive in 2001
EPS positive in 2002
[LOGO]Sprint [LOGO]MCI WORLDCOM
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Financial Assumptions
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Assumptions
o First full year of operation is 2001
o Base line for CAGR is year 2000, which factors in two full years of MCI
synergies
o PCS financials will be highlighted separately
[LOGO]Sprint [LOGO]MCI WORLDCOM
<PAGE>
Pro Forma Combination
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Growth Rates 2000-2004
Revenue EBITDA Cash EPS EPS
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WorldCom Standalone 15-16% 17-18% 19-20% 22-23%
Sprint Standalone 10-11% 15-16% 22-23% 22-23%
Pro Forma with Synergies 14-15% 19-20% 23-24% 27-28%
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[LOGO]Sprint [LOGO]MCI WORLDCOM
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PCS Financials
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2Q99 x 4 Revenues $ 2.9 B
Subscribers as of 6/30 4.0 M
ARPU $ 54
[LOGO]Sprint [LOGO]MCI WORLDCOM
<PAGE>
Pro Forma Revenue Mix
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Combined Company
[The following table was depicted as a pie chart in the printed materials.]
66% Voice
17% Data
8% Internet
3% International
6% Other
o Plus a path to PCS
- Today $3 billion growing at 70 percent
[LOGO]Sprint [LOGO]MCI WORLDCOM
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Synergies
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o Proven track record
o Synergies are real and achievable
o Expand existing commercial business arrangements
o Achieve synergy success from Day One
[LOGO]Sprint [LOGO]MCI WORLDCOM
<PAGE>
Synergies
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2001-2004
($ Billions) 2001 Cumulative
Line Costs $ 0.5 $ 3.4
SG&A 1.3 5.5
Other 0.1 0.8
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Total Operating $ 1.9 $ 9.7
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Capital Expenditures $ 1.3 $ 5.2
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[LOGO]Sprint [LOGO]MCI WORLDCOM
<PAGE>
Capital Expenditures
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o Reduced capital expenditures means lower depreciation expense
o Capital expenditure synergies in the first year projected to be $1.3 B
[LOGO]Sprint [LOGO]MCI WORLDCOM
<PAGE>
Credit Profile
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o Stock-for-stock transaction with significant operating and cash synergies
o Improved strategic and competitive position
o Credit profile anticipated to be stable to improving
[LOGO]Sprint [LOGO]MCI WORLDCOM
<PAGE>
Financial Summary
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o Minimal dilution because of synergies and tracking stock
o Economics drives the transaction, not accounting
o Purchase accounting preserves financial flexibility
[LOGO]Sprint [LOGO]MCI WORLDCOM
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[LOGO]WORLDCOM
