Filed by WorldCom, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Subject Company: WorldCom, Inc.
Commission File No. 0-11258
November 3, 2000
The following transcript contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended, including statements concerning future operating performance, share of
new and existing markets, and revenue and earnings growth rates. Such
forward-looking statements, which are not a guarantee of performance, are
subject to a number of uncertainties and other factors, that could cause actual
results to differ materially from such statements, including vigorous
competition; the ability to establish a significant market presence in new
geographic service markets, and the success and market acceptance of new
products and services. For a more detailed description of the factors that
could cause such a difference, please see WorldCom, Inc.'s filings with the
Securities and Exchange Commission. The Company disclaims any intention or
obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
We urge investors and security holders to read WorldCom, Inc.'s Registration
Statement on Form S-4, including the prospectus and proxy statement, when they
become available, because they will contain important information. When these
and other documents relating to the transaction are filed with the U.S.
Securities and Exchange Commission, they may be obtained without charge from
the SEC's website at http://www.sec.gov. Holders of WorldCom, Inc. stock may
also obtain each of these documents (when they become available) for free by
directing your request to WorldCom, Inc., c/o Investor Relations Department,
500 Clinton Center Drive, Clinton, Mississippi 39056. This communication shall
not constitute an offer to sell or the solicitation of an offer to buy, nor
shall there be any sale of securities in any state in which the offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such state. No offering of securities shall
be made except by means of a prospectus meeting the requirements of Section
10 of the Securities Act.
WorldCom, Inc. and certain other persons referred to below may be deemed to be
participants in the solicitation of proxies of shareholders to adopt the
proposals which will be set forth in the proxy statement contained in WorldCom
Inc.'s Registration Statement on Form S-4. The participants in this
solicitation may include the directors and executive officers of WorldCom,
Inc., who may have an interest in the transaction including as a result of
holding shares of common stock and/or options to acquire the same. A detailed
list of the names and interests of WorldCom Inc.'s directors and executive
officers is contained in the Company's proxy statement for its 2000 annual
meeting, which may be obtained without charge at the SEC's Internet Website
at http://www.sec.gov.
THE FOLLOWING IS A PRESS CALL TRANSCRIPT ISSUED BY
WORLDCOM, INC. ON NOVEMBER 1, 2000
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WORLDCOM
November 1, 2000
12:15 p.m. CST
Coordinator Good afternoon, and thank you for Standing by. I
would like to remind all parties that this call
is being recorded at the request of WorldCom.
If you should have any objections, you may
disconnect at this time. I would now like to
introduce your moderator for this call, Mr. Brad
Burns, Vice President of Public Relations for
WorldCom.
B. Burns Thank you. And thank you for joining us, everyone.
As you know by now, WorldCom today made an
announcement that we are realigning our businesses
to provide greater focus for shareholders and our
business units. With us here today is Bernie Evers,
President and CEO of WorldCom, who will make a few
brief comments, then take your questions. Bernie?
B. Evers Thanks, Brad. As Brad mentioned to you in his
opening comments, WorldCom is establishing two
separate business operating units today. One is
consumer focused, switch service focused, which will
be known as MCI. In the MCI unit will be the
consumer business, the dial-up Internet business, our
traditional wholesale business, our paging business,
which could be known as Skytel, and alternate
channels, which is really prepaid cards and a few
odds and ends like that. The primary objective of
forming this piece of the company is to focus the
unique characteristics of this business unit on cash,
cash generation.
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The other part of WorldCom, or the remaining part of
WorldCom, which will be known as WorldCom, will
focus on data, dedicated Internet, international, our
new Generation D initiatives, which is really at
this point Web hosting, IP/VPN services, and Web
centers; and will also have our business voice in it.
Now, the question that obviously comes up is why a
tracking stock? First consideration we gave as to
why a tracking stock is because it is the quickest
to close. Time to close was an issue that was very
important to us, that we get resolution of these
business units. The second is that it's seamless to
customers. They will be absolutely transparent to
all our customers. The third is that it gives
regulatory certainty. Tracking stocks do not require
any regulatory approvals. And it gives us financial
flexibility. By "financial flexibility," I mean the
ability of either company to allocate debt based on
the unit's capability of repaying the debt.
One of the things that WorldCom has suffered with over
the last little while is our perception in the
marketplace of not knowing where we're headed, and
this restructuring gives us an ability like we haven't
had in the recent past of providing clarity,
predictability to our shareholders, generating
shareholder value, and last but certainly not least,
focusing our management around the
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objectives of these two separate business units.
Brad, maybe we should take some questions.
B. Burns Great. Operator, we can open it up to questions now.
Coordinator Thank you. One moment, please. Our first question
comes from Robert Schoenberger of Clarion Ledger.
You may ask your question.
R. Schoenberger Good afternoon. My question is about Skytel being
listed in the tracking company. At the analyst
call this morning, John Sitchmore talked about
several different wireless technologies that all
seemed to come out of Skytel. How is that going to
reconcile with Skytel being in the secondary
company?
B. Evers The wireless technologies that John Sitchmore talked
about were wireless Internet technologies, and
Skytel is by and large a two-way and a one-way mobile
paging business. Because of those characteristics,
and because most of the subscribers are individual
subscribers, we feel like it fits best into the MCI
business unit. It doesn't mean that it couldn't be
used by and sold by and will continue to be sold by,
on a resale basis, our WorldCom business unit.
R. Schoenberger Will this mean a transfer of personnel from the
Skytel Wireless people to WorldCom?
B. Evers Well, I think you asked the question wrong. What you
mean to say is, does it mean the transfer of personnel
from WorldCom to MCI, and it does.
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R. Schoenberger Thank you.
Coordinator Richard Waters of Financial Times, you may ask your
question.
R. Waters Yes, hello. Given that what you've laid out here is
a new direction for WorldCom and the separation of
these two businesses and a change in direction from
what you've done up until this point, what about you
personally, Mr. Evers? Are you the right person to
lead this company? Do you have the right qualities and
management skills? And what are we going to see from
you in terms of a different sort of side in the
future?
B. Evers Well, I think that's probably a question that you
should ask my board of directors. I'm sure with
the recent performance of the stock, people have a
legitimate right to ask whether I have the ability
to lead this company. But I'm sure also that my
board of directors, who are largely shareholders,
will address that, if they feel like that's
appropriate.
R. Waters What have you heard from them? Have they given
you a view on that?
B. Evers I beg your pardon?
R. Waters What have they said to you about how long they
want you to lead this company now?
B. Evers They haven't told me that they have any time defined
when they would like for me to leave.
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R. Waters Okay.
B. Evers It doesn't take long to make that decision.
Coordinator Ms. Shawn Young of The Wall Street Journal, you may
ask your question.
S. Young Hello. Given that not all that long ago I remember
you making some very negative comments about
tracking stocks and how they were essentially sleight
of hand. I'd be interested to hear you sort of
walk us through the evolution of what turned it into
not slight of hand and a good decision. When did
you start considering this seriously?
B. Evers I don't remember what comments I made that indicated
that I thought a tracking stock was sleight of
hand. Can you refresh my memory?
S. Young I don't have them specifically in front of me, but -
B. Evers Well, what are you referring to, then?
S. Young It may have been a joke that you made -
B. Evers Oh.
S. Young You've been known to be sarcastic, and perhaps I
took you too seriously. In any case, would you
walk us through -
B. Evers I'm not going to - if you're asking me a question
about something you can't even remember, I'm not going
to address that. I can tell you that certainly from
the company's point of view, what process we have
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gone through is a rationalization of the assets that
we have. And those assets have very different
characteristics. Some have potential for fast growth;
some have potential for very little growth but have
potential for substantial cash flow.
And instead of kind of being in no-man's land in the
investor world, we thought it was best to give our
shareholders an opportunity, maybe different
shareholders over a period of time, the opportunity
for shareholders who are interested in cash flow and
dividends to participate in that part of what the
assets in the company are generating; and then
those that are looking for growth in revenues and
EBIT DA and earnings, and as a result, stock price,
for them to participate in that part of the company.
When you're in between, you're a piece of both, it
makes it very difficult for your shareholders and the
analysts who follow you to decide what is your main
business.
S. Young Okay. Can you tell us when you started to consider
that seriously?
B. Evers I don't know. I don't know what you mean when you
say "serious." I haven't had many days in my life
when I haven't been serious. But it's been for quite
some considerable period of time.
S. Young Okay, thanks.
Coordinator David Henry of USA Today, you may ask your question.
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D. Henry Mr. Evers, I wonder if you would talk a minute about
your relationship with the market. I mean, this must
have been a sort of humbling experience to go from a
time when the market is very enthusiastic about you,
that helped put high valuations on your stock,
helped you buy MFS with the UU Net, and on to MCI,
and now handed you a margin all on taking your stock
down and funded competitors like Level 3, dissed your
network. Could you talk a little bit about that?
B. Evers Well, this is certainly not an enjoyable experience.
If you want to call it humbling, it certainly is that.
I will never say that there haven't been mistakes made.
Some of those mistakes are mine. It's a mistake now
to look back and have spent a year trying to get
through the Sprint transaction. I'll also say that at
the time we entered into the Sprint transaction, we
made our best judgment, mine and others, on the
chances of it being approved from a regulatory point
of view, and believe to this day that it would
have been a good thing for the company. But that
ended up a mistake, and I certainly am accountable
for that mistake.
But I think any human being who sits in this seat
would say that it is more fun at a time when things
are going well than when we are having a struggle.
But I also believe, from the very deep parts of me,
that there is potential and opportunity to go back
to where we were, and that's the reason we've done
what we've done.
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D. Henry To follow up, thinking about what the markets may
still have in store for you, I've heard the references
to margins being good in data and in IP, and I'm
wondering, with all the capacity that the markets have
funded among your competitors, whether it's
reasonable to assume that those kind of margins will
be good and won't go the way of the margins in
Consumer Voice.
B. Evers Well, as more of the world goes to data traffic, the
data business as a whole will get more competitive.
I don't think it will be a result of the funding of
competitors who are putting in capacity. We
personally believe that there will not be an over-
supply of capacity. But I think it's important also to
realize that a very small percentage of the cost of
doing business in the data and Internet world is
putting in capacity. The fiber itself is a very
inexpensive piece, less than 20% of the total
cost of putting in a network. And the other part,
the 80%, is in the electronics that light up the fiber
that you put in the ground. That's not a cost that
anyone else has an advantage on us over, and is not a
cost that people incur before they get traffic and
before they get customers that use those networks.
So I think people will build capacity to meet the
needs of their customers. And I think that stands
WorldCom in good stead in the future, because of the
addition of the MCI marketing expertise. Marketing
and sales drives the demand for network, and we feel
like we'll be able to capture our share of the market
in that area.
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D. Henry Thank you.
Coordinator Nat Moore of Associated Press, you may ask your
question.
N. Moore Good morning, Bernie, good morning, Brad. Just
wanted to touch base with you regarding what kind of
impact you think this will have on your rank and file
shareholders, the folks from Brookhaven and Tupelo
who trek to the annual meetings. Do you think they're
going to be reacting positively to this?
B. Evers Will they be reacting positively to what, Nat?
N. Moore To announcing the spinoff as - for the tracking stock
for MCI ?
B. Evers Well, I don't think because they live in Jackson or
Brookhaven, they're going to be any different than
any other investors. If they think that what this
does is cause the stock to increase, and as a result
they have a better value proposition in what they own,
I think they'll like it. If we are not successful --
we certainly feel comfortable we will be - but if we
are not successful, I don't think I'm going to be any
better liked than I have been in the last few
months.
N. Moore Thanks, I appreciate it.
Coordinator John Van of Chicago Tribune, you may ask your question.
J. Van Hello, Bernie. I'm interested in one thing, in this
idea that the revenue from voice long distance has
been declining faster than
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expected. It's been talked about in the industry
for years now that the shift was going from voice to
data, and that that would mean that the traditionally
very lucrative voice margins were going to shrink.
What happened that caught you unawares, that you
didn't plan for this some years back? Because it's
not like it's been a secret.
B. Evers Well, if you're talking about voice going to data, I
guess that means you're talking about voice going to
voice over Internet protocol?
J. Van Well, that's of course coming up in the future,
but the idea being -
B. Evers Voice doesn't go to data.
J. Van No. What I'm getting at -
B. Evers So I don't know what -
J. Van -- is the idea that as this new capacity is being
built and that more competitors are looking to the
capture data market, that the voice becomes a
secondary play, and that the margins are going to
shrink.
B. Evers Well, that's not right. I don't quite understand the
premise of your question, but let me say that the
things that have significantly impacted the growth of
the voice business have been largely wireless, the
transition of people's use, instead of calling cards,
credit card calls and so on, over onto wireless, and
everybody knows how fast wireless has grown. And I
would not agree with your assumption that this is not
something we knew was happening; but it certainly has
accelerated
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over the last little while because of the success of
cellular, but also because of the reduction of
access costs, which has lowered the prices that we
charge for that service. That's a pass-through
service that gets passed on to customers and
businesses. I don't think it's a real big surprise
that our voice services are decreasing at the rate
they're decreasing at.
J. Van So you weren't surprised.
B. Evers I think that's what I said.
J. Van I thought originally you said that you had been
surprised. I'm sorry, I misunderstood. So you've
not been surprised at the declining margins in voice.
B. Evers Well, I was really talking about revenues more than
margins. The declining margins in voice - the
margins in voice have not been declining-on the
business side have been declining some, but on the
consumer side have not been declining substantially.
J. Van So where - I mean, these cellular calls, if they go
long distance, they're not going wirelessly long
distance; they're going over wires.
B. Evers So what are you saying?
J. Van Well, that's what I don't get. You said that the -
B. Evers What do you mean, they're going over wires? They're
going wireless to wireless.
J. Van Yes. But if I make a call in Chicago to somebody in
New York, it -
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B. Evers Less than 15% of cellular is long distance.
J. Van But you're in the long distance business.
B. Evers Well, that's right. But that's what I'm saying, very
little of that happens. So that is in-region stuff,
in the State of Michigan or whatever, like that.
J. Van Well, that's what I'm getting at. So how does the
rise of wireless affect the decline in long-distance
voice revenues?
B. Evers Well, there is -- that 15% that is going over to
wireless on a total market share basis is quite a
significant number. Your question was whether it was
a surprise to us.
J. Van Yes.
B. Evers And I don't think it was a surprise to us. It was a
little steeper incline than maybe what we had
projected.
J. Van So what can you do about that?
B. Evers What can we do about that? Create a tracking stock.
J. Van Okay. Thank you.
B. Burns Thanks, John.
Coordinator Ms. Anaid Carew of Computer Wire, you may ask your
question.
A. Carew Hello. I understood from the earnings call in June
earlier this year that you were considering
keeping your wholesale business
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with your business side. What has changed since then
to make you put it along with the consumer?
B. Evers Well, it's not with the consumer. It's in the same
division as the consumer. It's still a standalone
operating business in that business unit. But I
don't know of anything that's changed. We have always
looked at putting in that tracker, if we established
one, consumer and wholesale.
A. Carew Right. Okay. Your comments about how long you spent
on this Sprint merger and the fact that that didn't
get together in the end, how much of an impact would
you say this had in terms of distraction from your
core business and making something like this happen?
B. Evers Well, when you say "how much," that implies that
there's a way to measure it definitively, and I
don't know that I can do that. But I can tell you
that when you spend a lot of your efforts in front of
regulators, you don't come out with new products
that you might otherwise come out with. There is
some diversion of focus. You spend a lot of time
talking about how you merge organizations together and
that type of thing. So I don't know how to quantify
that in a number or something like that, but it
certainly is a diversion of focus.
A. Carew Right. Okay. And in terms of - I mean, you seem to
be focusing a lot on wireless, and the fact that -
B. Evers I'm focusing on wireless?
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A. Carew No, no, no; the last question that was asked, you
said that part of the reason for the decline in long
distance was the growth in wireless, and I'm just
wondering, considering, okay, you thought before you
wanted to go into wireless with Sprint, I'm just
wondering, could it ever be a possibility or is it a
definite no-no, the thought of somehow getting a
wireless to go with your consumer business?
B. Evers Look, it is a definite no-no for right now. Would it
ever be? I have no idea what my successor will
do.
A. Carew Your successor?
B. Evers Yes.
A. Carew When you say your successor, how do you mean? I
didn't know you were-
B. Evers Well, you said forever. I don't know when in the
hell that is.
A. Carew Okay. But do you see - there's not much likelihood,
then, in the short term.
B. Evers That's what I said.
A. Carew Or in the near term? I mean in terms of UMTS coming
up and all of that?
B. Evers Give me a break. Define the difference in your
opinion between "near term" and "short term."
A. Carew Okay. Let's say the next two, three years.
B. Evers Well, that's long term to me.
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A. Carew Is it?
B. Evers At this point in time, I don't see any reason for
us to do something -
if you're talking about acquiring a
wireless company, I don't see -
A. Carew Or acquiring Spectrum or - you know, there are
auctions coming up?
B. Evers Oh. I don't see us involved in that in the next -
period of time.
A. Carew Right. Okay, thank you very much.
B. Burns Thanks. Operator, we can take one more question,
please.
Coordinator Thank you. Our final question comes from Elizabeth
Douglas of the L.A. Times.
E. Douglas Good morning. I just wondered if you could elaborate
a little bit on what you think lies ahead for the
consumer long distance business.
B. Evers Elizabeth, why don't you explain a little bit more
about what you're getting at, so I can be more
concise.
E. Douglas Well, both your business and AT&T's business have
incredibly good margins still, margins that many
businesses would die for, yet Wall Street doesn't
reward you for that too much. And the trends that
you mentioned earlier seem to point to decreasing
revenues. So I'm wondering how you plan to keep
those margins up while revenues decline, etc.
B. Evers Well, I don't know that we will be able to keep them
up as margins decline. I would think that we
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would have some impact on our margin as we go
forward in the consumer business. But unfortunately,
public companies are not judged on the basis of the
cash flow they generate. Sad but true. They're
judged primarily on the revenue growth that they
generate, and the growth - not actual, but
growth - in earnings per share. And that is a
segment of the market that does not provide
opportunity for MCI to significantly grow revenues,
and as a result, we aren't anticipating significantly
growing earnings per share. But cash will be the
main driver of that business.
Now, there are several factors that have caused that
to occur. Let me just give you a few. Certainly,
the Bell operating company's entrance into the
consumer long distance business is a factor. They
are powerful competitors. The regulatory environment
is a very, very significant factor. Over the
last couple of years what has happened is in the
Department of Justice, when the Bell operating
companies wanted to get together so that they could
be bigger, so that they could be more successful
companies, they were allowed to do it. Long distance
companies have not been able to do that. And that's
a very, very significant factor.
At the FCC, we have had several things that have
materially impacted our business. One is the Calls
Plan. The second thing is de-tariffing. De-tariffing
is a very significant issue for someone who tries to
generate their growth
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through telemarketing, because now with de-tariffing,
we have to have a signed contract for every
customer. The fact that - dealing with slamming
complaints. No one likes slamming. But the fact of
the matter is, mistakes are made periodically in the
telemarketing business. Very seldom are those
mistakes intentional. But the fact of the matter is,
they do occur. And the FCC is now shirking its
responsibility and handing off to all the states
individually to handle slamming complaints. And
that's a very, very significant detractor from our
ability to grow our business.
There are several others. The bottom line of it is,
the social engineering that has gone on in that
environment is destroying the competitive landscape.
E. Douglas Could I have a follow-up on that?
B. Ever Sure.
E. Douglas I just wonder what you see, then, looking out at the
long distance business five or ten years from now,
do you see you and MCI and Sprint still being major
players, or do you think the Auerbachs, once they're
in, basically become the leaders?
B. Evers Well, they will certainly become the leaders in the
consumer side of the business. No question about
that.
E. Douglas Thank you.
B. Burns Thanks, everybody. We appreciate you joining us
today. If you have any additional questions, feel
free to call 1-800-644-NEWS, and we'd be happy to
help you out as well as possible. Thank you.
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