MCI chief exec Capellas keeps tone upbeat in Networld+Interop speech

Kevin Rademacher

Wednesday, May 12, 2004 | 10:44 a.m.

In a speech Tuesday morning in Las Vegas, Michael Capellas was the picture of enthusiasm.

The new chief executive of Virginia-based MCI Inc., the former WorldCom, said the company is focusing on customer satisfaction as it gains speed after emerging on April 20 from the largest bankruptcy case in U.S. history.

Capellas said MCI now enjoys a strong balance sheet, despite reporting on Monday a first-quarter loss of $388 million. Accompanying that earnings news were plans to layoff 7,500 employees in addition to 5,700 job cuts announced earlier this year.

Still, Capellas focused on the positive.

"We now have very low debt," he said of the company's post-bankruptcy position during the opening keynote address at the technology convention Networld+Interop.

The company still provides telecommunications services to 65 percent of the companies on the Fortune 500. He also said the company emerged from bankruptcy proceedings with its core assets in tact.

While MCI can tout the benefits of dumping billions of dollars in debt, the effect on competition in the telecommunications industry is a point of controversy.

Companies such as Sprint -- the dominant local telephone provider in Las Vegas -- have spent huge amounts of capital to build a local and national network with no bankruptcy relief. Sprint officials declined comment on MCI's financial state. Industry analysts, however, have indicated that MCI is now in a preferable competitive position.

"It is kind of one of the ironies of the whole situation with WorldCom and all of the scandals," said Joseph Laszlo, a telecommunications analyst for Jupiter Research in New York. "Competitors may very well see it that at the end of the day the company was being rewarded for its bankruptcy."

Still Laszlo said the future for MCI will not be easy.

"It's important to keep in mind that MCI really lucked out in some ways," he said. "It is really surprising that they didn't lose more customers than they did ... But it may have harmed their reputation in terms of attracting new customers."

While MCI may be best known for providing phone service to many businesses, as well as residential long distance service, Capellas focused on the company's plans to build its technology presence. The key to that plan, he said, is an international Internet-based communications backbone. That network allows the company to develop products "that link telecommunications and computing," he said.

On Tuesday, MCI announced that it enlisted Microsoft Corp. as a partner in creating new voice and data communications services. The first product of their collaboration will be built around an Internet-based video conferencing system.