MCI Communications Corp.

1983

Nathan Lyons-Smith 12/14/2009

Contents
Executive Summary....................................................................................................................................... 3 Introduction .................................................................................................................................................. 4 Background ................................................................................................................................................... 4 Before the First Antitrust Suit (Before May 1974) .................................................................................... 4 Before the Second Antitrust Suit (June 1974 January 1982) ................................................................. 4 After the Second Antitrust Suit (February 1982 Today) ........................................................................ 4 SWOT Analysis Pre AT&T Breakup ............................................................................................................. 5 SWOT Analysis Post AT&T Breakup ........................................................................................................... 5 MCIs Past Financial Strategy ........................................................................................................................ 6 MCI Financial Analysis for Growth ................................................................................................................ 7 Calculation of Cost of Debt and Cost of Equity ......................................................................................... 7 Calculation of MCIs Future Financial Needs ............................................................................................ 8 Conclusion ..................................................................................................................................................... 9 Appendix 1 Pre AT&T Breakup ................................................................................................................. 10 Appendix 2 Post AT&T Breakup ............................................................................................................... 11 Appendix 3 Chronology of Significant Events .......................................................................................... 12 Appendix 4 MCI Beta Calculation............................................................................................................. 13 Appendix 5 S&P 500 Data Set 1 (1980-1983) ........................................................................................... 14 Appendix 6 S&P 500 Data Set 2 (1980-1983) ........................................................................................... 15 Appendix 7 Risk Free Rate T-Bill Average 1980-1983 ........................................................................... 16 Appendix 8 Calculation of MCIs rD .......................................................................................................... 17 Appendix 9 Calculation of MCI Required rE.............................................................................................. 17 Appendix 10 Table of Rates...................................................................................................................... 17 Appendix 11 MCI Pro Forma Balance Sheet ............................................................................................ 18 Appendix 12 MCI Pro Forma Sources and Uses ....................................................................................... 19 Appendix 13 MCI Pro Forma Income Statement ..................................................................................... 19 Appendix 14 MCI Proposed Financial Moves........................................................................................... 20 Appendix 15 Financial Ratio Analysis ($ billions) ..................................................................................... 20

Executive Summary
MCI has been providing long distance telecommunication services for several years. The company has seen its revenue grow from almost nothing in FY1974, to more than $1 billion in FY1983. The company has had problems from AT&T unfairly using its monopoly and from the FCC passing regulation against MCIs services. Each time this has happened, the courts have ruled in MCIs favor, and MCI has continued to grow. Recently, the FCC has broken up the AT&T monopoly and forced it to compete on fairer terms. This has given MCI the opportunity to steal a large chunk of market share from AT&T, but MCI would need to obtain funds and grow in order to do this. The company has raised capital in the past by issuing convertible preferred stock and debentures that allow MCI to convert the debt into equity and take on additional debt. The cost of debt for MCI was significant, but MCI needed the money for growth. MCIs gamble paid off and the growth outpaced the expense. The growth in the stock has enabled them to convert the old debt and take on new debt, allowing them to further grow. MCI is in an excellent strategic and financial position for growth. The market share is theirs for the taking, they have excellent debt history and financial ratios, they have $550 million in cash, and their stock price is $47 per share. The Pro Forma Balance Sheet, Sources and Uses, and Income Statement show that MCI is going to need significant capital moving forward. MCI will need to get this capital from the market, first from the sale of common stock and then from the sale of convertible debentures. Their cost of debt is calculated to be 12.46% and their required return on equity is calculated to be 16.17%. The additional debt and plant and equipment growth will allow MCI to grow from the 1983 revenue level of $1.1 billion to the expected 1990 revenue level of $10.6 billion. The changes will help MCI become a big player in the long-distance telecommunications industry and will provide a strong base for future operations of the company.

Introduction
MCI needs to determine what its financial policy should be for the next few years so that it can capitalize on its market position and grow into a hugely profitable company. MCI needs to determine its strategic position, financial structure, and capital needs necessary for its potential growth.

Background
MCI has been providing long distance telecommunication services for years. The company has revenue growth from almost nothing in FY1974, to more than $1 billion in FY1983. In the last two years, MCIs stock price has increased five-fold. MCI operates in an industry historically plagued by a strong monopoly (AT&T) and government involvement via the Federal Communications Commission (FCC). The company background can be broken down into three eras based on antitrust lawsuit decisions.

Before the First Antitrust Suit (Before May 1974)

In 1971, the FCC allowed new long distance companies to compete, and MCI began construction of its telecommunications network. MCI wanted more growth, but AT&T was refusing interconnection services. MCI sued AT&T in 1974, won the suit, and resumed construction of its network.

Before the Second Antitrust Suit (June 1974 January 1982)

MCI started turning a profit in 1976 with its successful Execunet service. The service allowed MCI to attract small business subscribers who could not afford a dedicated long-distance line. MCI became very profitable and exhausted its tax loss carry forward by the end of FY1981. MCI began offering Execunet type services to residential customers, and saw the potential growth, yet they were constrained by their lack of investment capital. SVP Brian Thompson noted that MCI needed more funds, saying, Economies of scale and scope are everything in this business.

After the Second Antitrust Suit (February 1982 Today)

MCIs main competitor, AT&T, has been the target of recent antitrust lawsuits that stand to significantly change the landscape of the telecommunications business. The settlement calls for the 4

separation of AT&T long distance from its local telephone company subsidiaries. AT&T Communications would now compete directly with MCI, GTE, and ITT. The newly independent local telephone companies would be forced to provide equal quality of access to all providers, and therefore the rates paid by MCI would have to rise by about 80% in 1984. MCI will have the opportunity to take some of AT&Ts 95% market share but MCIs cost advantages will erode and AT&Ts competitive flexibility will increase.

SWOT Analysis Pre AT&T Breakup

MCI had many strengths before the breakup of AT&T. The Execunet service and the acquisition of Xerox and Western Union International were profitable. Their capital structure and financing had allowed them to continually increase capital and expand. Additionally, they had a cost advantage over AT&T. However, they still lacked additional investment capital and market share. MCIs opportunities included huge possible growth in the residential Execunet market and small growth in market share and plant and equipment. Their threats came from the AT&T monopoly and FCC regulation. MCI was in an excellent position for mild growth before the AT&T breakup, but they were not really ready to go full steam ahead because they faced the monopoly. The AT&T breakup will put them in a better position. The Pre AT&T Breakup SWOT is shown in Appendix 1.

SWOT Analysis Post AT&T Breakup

The FCCs breakup of AT&T created all new SWOT for MCI. They still had their successful Execunet business. They may still enjoy their lower costs for a small time period but they no longer have the burden of the AT&T monopoly. Their stock value is at an all-time high and they have $550 million in cash. Their weaknesses still are their lack of additional investment capital and lack of market share. They are also facing an erosion of competitive advantage due to the FCC ruling. MCIs new opportunities include stealing some of AT&Ts 95% market and they can do this by using their high stock value and cash. Their interest coverage ratio is high suggesting that they can 5

easily handle more debt. They should be able to leverage their financial policy to raise capital and expand. Additionally they have the opportunity to implement a new product, MCI Mail. MCIs new threat is that AT&T will try to compete on price. The Post AT&T Breakup SWOT is shown in Appendix 2.

MCIs Past Financial Strategy

MCI has had several successful capital campaigns in the past. Their first fundraising attempts carried higher interest rates because MCI was a riskier company at the time. MCI often secured loans by offering them with put warrants on their stock shares. After MCI began to be profitable, they were able to use a tax loss carry forward to reduce their taxable income. When the Execunet program began to generate significant profits, MCI again needed capital to expand. In 1978, MCI had the opportunity to accelerate their growth with additional capital. MCIs previous loans had covenants on them preventing further debt, but MCI was able to circumvent this restriction by paying off the loans. Eventually MCI was able to enter the public capital markets and raise money by selling convertible preferred stock. Preferred stock offered dividends to the holders and allowed them to convert to common stock. MCI used this method so that they would not deflate the value of their common stock. The dividend was also a tax shield for corporate investors since MCI still had carry forward tax losses. Lastly, there was a call provision on the preferred stock that could be exercised by MCI and forced the holders to convert to common stock. This would prevent preferred stock from draining cash flows. Because MCIs stock was steadily rising, MCI was able to issue preferred stock, convert it to common stock in several months, retire the old debt, and take on new debt. MCI also began selling subordinated debentures and convertible debentures. These debentures were eventually converted into common stock, and MCI was able to continue taking on even more debt. The company was very profitable and, even though the number of common shares was growing, the stock value was also growing. The rates on MCIs debt were high, but the company was so profitable that it was able to easily cover the interest expense. 6

MCI was able to expertly use debt to leverage the company and explode with the growth in the market. They sold convertible securities, converted them to common stock, and took on more debt. This process was repeated many times, each time allowing MCI to continue to grow further through the increase in capital. When MCI issued these debts, it was taking a very large risk. The interest rates were high, and the company would have very serious financial problems if they were not able to grow. Management had significant confidence in the company and issued the high cost debt because they believed that the cost of debt was secondary to the need for available funds to grow. It was a great gamble, but it turned out that they were right. A chronology of significant MCI events is shown in Appendix 3. MCI now needs to figure out how to position itself for the future growth opportunities.

MCI Financial Analysis for Growth

MCI believes it has a great opportunity for growth; however, it needs to figure out several financial structure questions. MCI needs to determine out how much money it is going to need in the coming years, where it can get that money, and how much it is going to cost them.

Calculation of Cost of Debt and Cost of Equity

The first part of the process is to calculate the cost of the money; the required return on debt (rD) and the required return on equity (rE). To do this, an equity Beta for MCI is needed. This was done by comparing MCI returns to S&P 500 returns for a period of 3 years and a period of 5 years. The Betas were vastly different and so the Beta for the 3 year period was used so that the more current correlation could be used. MCI has been dramatically changing over the past 3 years and it would be more appropriate to use the more recent equity beta value. The equity beta value is 1.822 (Appendix 4). After calculating the beta, the next step is to calculate an Expected return on the market from equity investors. To do this, data from two different S&P 500 data sets was used and the monthly returns were calculated. The average monthly return was near 1.00%, giving a compounded yearly

return of around 12.75%. This data is tabulated in Appendix 5 and Appendix 6. The data sets extend from 1980 to March 1983, similar to the beta calculation. The next step involves determining a risk-free rate of return. This was calculated using the average return on the 13-week t-bill for the same 1980 to 1983 period. The corresponding data is shown in Appendix 7 and the calculated risk-free rate is 11.72%. Exhibit 7 from the case was used to calculate the required return on debt for MCI. The average return of the MCI bonds from 1980 to 1983 was taken and calculated to be rD = 12.46%. This is very high considering the expected market rate is only 12.75%. To account for this, the average return for Utilities Preferred Stock (Medium) was calculated and found to be 14.17%. This was the value used for the expected return for the market (instead of the 12.75%) because it was calculated from similar companies preferred stock. This data and corresponding calculations are shown in Appendix 8. The calculation for the required return on equity (rE), using the CAPM, is shown in Appendix 9. The calculation shows that MCIs cost of equity is 16.17%. All of the rates are shown in Appendix 10.

Calculation of MCIs Future Financial Needs

Exhibit 9A of the case projected MCIs capital investment needs for FY1984 FY1990. These rates, and the data in the case, were used to create Pro Forma Balance Sheet, Sources and Uses, and Income Statement for the corresponding fiscal years. These are shown in Appendix 11, 12, 13

respectively. The Pro Forma statements show that MCI is going to need significant cash in order to undertake the capital investment plans that will allow it to achieve the 20% market share that it desires. The projections call for capital expenditures ranging from $890 million in FY1984 to $2.76 billion in FY1987. MCI does not generate that much cash, and so it needs to generate additional capital. The proposed means of generating this additional capital are tabulated in Appendix 14. MCI will begin by selling $481 million in common stock in the same manner that it has sold it in the past. The share price is currently $47 per share and MCI needs to capitalize on the high value of the shares while it

can. This amount will satisfy MCIs needs for 1984. From 1985 to 1989, MCI will sell convertible debentures in the same manner that it has in the past. The debentures will be convertible so that MCI can add them to the common stock and then continue to issue more debt. The cost of this debt is the calculated rD (12.46%) although it may be lower considering that recent interest rates have been significantly lower. Each year from 1985 to 1989, MCI will take on additional debt and convert some of the older debt (although the conversion was not taken into account in the financial statements). The proposed additional debt will give MCI the money it needs to execute all of its expansion plans and take advantage of the FCC breakup of AT&T. The additional debt will change MCIs financial ratios to be more in line with other pure-play competitors. This effect is shown in Appendix 15. MCIs current ratio will drop and its debt ratio will rise. If MCI continues to be profitable, it will have no problem converting the debt or paying it down. The revenue will greatly increase and MCI will be able to compete on more even terms with AT&T.

Conclusion
MCI is poised to be very profitable, but they need the capital infusion that will enable the growth. MCI has an excellent history of taking on debt, converting it into equity, and taking on additional debt. The company should continue to do this, especially as it experiences astounding growth. MCIs calculated cost of equity and cost of debt are reasonable, and should allow MCI to borrow the money from the public and private sectors and put it to use growing the company. If growth does not hit target levels, MCI needs only to slow down their proposed increase in debt. If growth exceeds target levels, MCI will need to search for more capital so that it can capitalize on the new possibilities. MCI has a great opportunity ahead of itself because of the FCC breakup of AT&T, and the company needs to be ready to step into the vacuum created by the breakup. They need to obtain the required capital shown in Appendix 14, so that the company can take advantage of its growth potential.

Appendix 1 Pre AT&T Breakup

Strengths: Execunet Service (business + residential) Tax loss carry forward Acquistions of Zerox and Western Union International Financial lending terms Lower fees to local telephone networks Weaknesses: Lack of investment capital Lack of market share

Opportunities: Residential growth in execunet Possibility of expanding market Expanding capital investment

Threats: FCC regulation AT&T abusing their power and freezing MCI out of the market GTE, ITT competition

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Appendix 2 Post AT&T Breakup

Strengths: Execunet Service (business + residential) FCC Lifted restrictions High stock value $550 million in cash Weaknesses: Lack of investment capital Lack of market share Erosion of competitive advantage

Opportunities: Growth into AT&T's 95% market share Use of high stock value and $550 million cash High interest coverage ratio Use of financial policy to get investment capital MCI Mail Threats: AT&T Competition and abuse GTE, ITT competition FCC meddling Increased fees and competition from AT&T

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Appendix 3 Chronology of Significant Events

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Appendix 4 MCI Beta Calculation

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Appendix 5 S&P 500 Data Set 1 (1980-1983)

From http://www.econstats.com/eqty/eqem_mi_1.csv Month 1983-03 1983-02 1983-01 1982-12 1982-11 1982-10 1982-09 1982-08 1982-07 1982-06 1982-05 1982-04 1982-03 1982-02 1982-01 1981-12 1981-11 1981-10 1981-09 1981-08 1981-07 1981-06 1981-05 1981-04 1981-03 1981-02 1981-01 %Chg for Month 3.309 1.9 3.313 1.523 3.597 11.045 0.761 11.598 -2.299 -2.029 -3.916 4.001 -1.017 -6.055 -1.754 -3.008 3.659 4.915 -5.383 -6.21 -0.221 -1.041 -0.166 -2.346 3.603 1.328 -4.574 Average Monthly Return Compounded Yearly Return 1.01% 12.75%

1980-12 1980-11 1980-10 1980-09 1980-08 1980-07 1980-06 1980-05 1980-04 1980-03 1980-02 1980-01

-3.387 10.238 1.602 2.517 0.584 6.504 2.697 4.657 4.114 -10.179 -0.438 5.762

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Appendix 6 S&P 500 Data Set 2 (1980-1983)

From - http://finance.yahoo.com/q/hp?s=^GSPC&a=00&b=1&c=1980&d=02&e=1&f=1983&g=m Date Open Close % Change 3/1/1983 148.07 150.88 0.018978 2/1/1983 145.29 148.06 0.019065 1/3/1983 140.65 145.3 0.033061 12/1/1982 138.56 140.64 0.015012 11/1/1982 133.72 138.53 0.035971 10/1/1982 120.4 133.72 0.110631 9/1/1982 119.52 120.42 0.00753 8/2/1982 107.71 119.51 0.109553 7/1/1982 109.52 107.09 -0.02219 6/1/1982 111.97 109.61 -0.02108 5/3/1982 115.96 111.88 -0.03518 4/1/1982 111.96 116.44 0.040014 3/1/1982 113.11 111.96 -0.01017 2/1/1982 119.81 113.11 -0.05592 1/4/1982 122.55 120.4 -0.01754 12/1/1981 126.35 122.55 -0.03008 11/2/1981 122.35 126.35 0.032693 10/1/1981 116.18 121.89 0.049148 9/1/1981 122.79 116.18 -0.05383 8/3/1981 130.92 122.79 -0.0621 7/1/1981 131.21 130.92 -0.00221 6/1/1981 132.59 131.21 -0.01041 5/1/1981 132.81 132.59 -0.00166 4/1/1981 136 132.81 -0.02346 3/2/1981 131.27 136 0.036033 2/2/1981 129.48 131.27 0.013825 1/2/1981 135.76 129.55 -0.04574 12/1/1980 140.52 135.76 -0.03387 11/3/1980 127.47 140.52 0.102377 10/1/1980 125.46 127.47 0.016021 9/2/1980 122.38 125.46 0.025168 8/1/1980 121.67 122.38 0.005835 7/1/1980 114.24 121.67 0.065039 6/2/1980 111.24 114.24 0.026969 5/1/1980 106.29 111.24 0.046571 4/1/1980 102.09 106.29 0.04114 3/3/1980 113.66 102.09 -0.10179 2/1/1980 114.16 113.66 -0.00438 1/2/1980 107.94 114.16 0.057625

Average Yearly

0.97% 12.22%

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Appendix 7 Risk Free Rate T-Bill Average 1980-1983

From - http://research.stlouisfed.org/fred2/data/TB3MS.txt

1980-01-01 1980-02-01 1980-03-01 1980-04-01 1980-05-01 1980-06-01 1980-07-01 1980-08-01 1980-09-01 1980-10-01 1980-11-01 1980-12-01 1981-01-01 1981-02-01 1981-03-01 1981-04-01 1981-05-01 1981-06-01 1981-07-01 1981-08-01 1981-09-01 1981-10-01 1981-11-01 1981-12-01

12.00 12.86 15.20 13.20 8.58 7.07 8.06 9.13 10.27 11.62 13.73 15.49 15.02 14.79 13.36 13.69 16.30 14.73 14.95 15.51 14.70 13.54 10.86 10.85

AVERAGE

11.72

1982-01-01 1982-02-01 1982-03-01 1982-04-01 1982-05-01 1982-06-01 1982-07-01 1982-08-01 1982-09-01 1982-10-01 1982-11-01 1982-12-01 1983-01-01 1983-02-01 1983-03-01

12.28 13.48 12.68 12.70 12.09 12.47 11.35 8.68 7.92 7.71 8.07 7.94 7.86 8.11 8.35

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Appendix 8 Calculation of MCIs rD

MCI Average rD = 12.46% Utility Medium Preferred Stock 14.17% Industrials Bonds Preferred Stock Issue Date Dec. 1978 Sept. 1979 Jul. 1980 Oct. 1980 Apr. 1981 Aug. 1981 May 1982 Sept. 1982 Mar. 1983 A 9.17% 9.74% 11.35% 12.92% 13.29% 16.25% 15.50% 13.75% 12.50% BBB Medium Speculative 9.76% 9.45% 10.34% 10.41% 9.76% 11.53% 11.74% 10.56% 10.91% 13.03% 11.43% 11.98% 14.18% 13.19% 13.65% 17.25% 13.46% 14.99% 16.50% 13.16% 14.62% 14.63% 13.21% 14.49% 13.00% 11.36% 12.67%

Utilities Bonds Preferred Stock MCI A BBB Medium Bonds 9.50% 9.78% 10.48% 10.56% 10.05% 10.51% 10.97% 12.00% 11.54% 12.60% 12.32% 15.00% 12.79% 14.14% 14.32% 12.27% 14.01% 15.17% 15.12% 16.80% 17.50% 18.00% 15.85% 10.25% 16.25% 17.00% 14.93% 10.00% 14.00% 15.13% 14.11% 15.17% 12.75% 13.25% 12.51% 7.75%

Appendix 9 Calculation of MCI Required rE

= + = 11.72% + 1.822 14.17% 11.72% = 16.17%

Appendix 10 Table of Rates

1980-1983 MCI Beta S&P 500 (market) Utility Rate Risk-free T-Bill Rate MCI Required rE MCI Required rD Value 1.822 12.75% 14.17% 11.72% 16.17% 12.46%

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Appendix 11 MCI Pro Forma Balance Sheet

Market Share 1983 542 162 9 713 1,324 27 2,064 251 22 48 321 896 88 1,305 12 576 171 2,064 4% 6.20% 1984E 442 251 14 707 2,041 51 2,799 389 34 48 471 896 153 1,520 12 1,057 210 2,799 9.60% 1985E 342 389 22 752 3,236 79 4,068 602 53 48 703 1,951 241 2,895 12 1,057 104 4,068 13.50% 1986E 192 547 30 769 4,755 111 5,636 847 74 48 969 3,162 347 4,478 12 1,057 89 5,636 18.60% 1987E 99 753 42 894 6,914 153 7,962 1,167 102 48 1,317 5,036 467 6,820 12 1,057 72 7,962 19.80% 1988E 99 802 45 945 7,622 163 8,731 1,242 109 48 1,399 5,498 607 7,504 12 1,057 158 8,731 20% 1989E 99 810 45 954 7,902 165 9,021 1,255 110 48 1,413 5,511 753 7,677 12 1,057 275 9,021 20% 1990E 165 810 45 1,020 8,136 165 9,321 1,255 110 48 1,413 5,511 893 7,817 12 1,057 435 9,321

Cash and equiv. AR Other Current Assets Plant, Equip. Other Total Assets AP Taxes Short-term debt Current Liabilities Long-term debt Deferred taxes Total Liabilities Preferred stock (par) Common stock (par) Surplus capital paid in Retained earnings Total Liabilities, net worth

Note A Note B Note B

Note C Note B

Note B Note B Note D

Note E Note C

Note F Note F Note G Note C

Note A - Cash used for investment Note B - Growth based on market share Note C - Based on Exhibit 9A in Case Note D - No change in short-term debt Note E - Long term debt issued to raise funds for P&E Note F - Preferred stock kept at 0, Common stock kept at 12 Note G - Common stock sold to raise funds for P&E

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Appendix 12 MCI Pro Forma Sources and Uses

1983 Funds from Operations Retained earnings Depreciation Other Total External Financing Net increase in lease obligations Other net borrowing, sale of securities Total Total sources Uses of Funds Investment in Plant and Equip Acquisitions Increase in working capital Change in cash holdings Total Uses 171 109 57 337 1984E 210 173 70 453 1985E 104 272 92 468 1986E 89 412 112 613 1987E 72 601 126 799 1988E 158 749 148 1,055 1989E 275 800 155 1,230 1990E 435 Note A 826 Note A 148 Note B 1,409

(18) 842 824 1,161

20 481 501 954

20 1,055 1,075 1,543

20 1,211 1,231 1,844

20 1,874 1,894 2,693

20 462 482 1,537

20 13 33 1,263

20 Note C - Note D 20 1,429

623 195 (55) 398 1,161

890 164 (100) 954

1,467 176 (100) 1,543

1,931 63 (150) 1,844

2,760 26 (93) 2,693

1,457 80 1,537

1,080 183 1,263

1,060 303 66 1,429

Note A Note E Note F Note G

Note A - Based on Exhibit 9A in Case Note B - Deferred Taxes increase + Employee Stock Purchase Plan Note C - Average over past 6 years Note D - Capital raised Note E - Assumed no more acquisition, just investment in P&E Note F - Adjusted for assumed need

Appendix 13 MCI Pro Forma Income Statement

1983 1,073 295 75 21 241 70 171 171 1984E 1,850 380 100 13 293 83 210 210 1985E 3,160 390 231 3 162 58 104 104 1986E 4,870 590 382 4 212 123 89 89 1987E 7,380 890 616 4 278 206 72 72 1988E 8,660 1,125 673 5 457 299 158 158 1989E 9,600 1,345 675 5 675 400 275 275 1990E 10,560 1,580 675 Note A 5 910 475 435 435

Revenue Operating Income Interest expense Interest income Profit before tax Tax provision Net income Preferred dividends Incomefor common stock

Note A - Increases as increased Debt taken on

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Appendix 14 MCI Proposed Financial Moves

1984E 481 1985E 1,055 1986E 1,211 1987E 1,874 1988E 462 1989E 13 1990E

Common Stock Convertible Debentures

Appendix 15 Financial Ratio Analysis ($ billions)

MCI 1990E 10.6 0.43 9.3 26.50% 10.2% 28.9% 79% 0.72 2.3 MCI 1.1 0.17 2.1 15.90% 11% 32.40% 55% 2 4.2 1983 AT&T 65.1 6.99 148.2 10.7 8.6 12.2 43% 0.9 3.6 GTE 12.1 0.9 21.9 7.4 4.1 15.6 57% 1 2.4 ITT 16 0.7 14.1 4.4 4.8 12.7 38% 1.3 2.5

Revenue Net income Assets RoS RoA RoE Debt ratio Current ratio Interest coverage

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