WorldCom Inc, the second-biggest US long-distance telephone company, will cut 5,000 more jobs, or 8.3 percent of its workforce, as part of a plan to get out of the largest bankruptcy by the third quarter.
To help save US$2.5 billion a year, WorldCom will also close offices and reduce line costs, or fees paid to use rivals' networks, by 13 percent, the company said in a statement.
CEO Michael Capellas, hired two months ago to lead the company out of bankruptcy, vowed to keep WorldCom mostly intact. The company will file a reorganization plan by April 15. WorldCom, which slashed about 20,000 jobs last year and is selling assets, filed for Chapter 11 in July after disclosing accounting irregularities that may total more than US$9 billion.
"They're already operating on a skeleton-crew basis," said Carl Lawrence, president of Warwick Capital Management, which has sold most of its WorldCom shares in the past month. "Some of the service quality is going to suffer."
Capellas, the former Hewlett-Packard Co. president who replaced John Sidgmore as WorldCom CEO, said in the statement job reductions were necessary "to meet the difficult demands of our industry."
The company said customers will continue to get the same level of service.
The 5,000 jobs to be eliminated are mainly corporate and administrative, WorldCom said. It didn't say where the cuts will occur. The company, which has 60,000 workers, said it will pare sales, general and administrative expenses 13 percent through the firings and office consolidation. WorldCom had a peak workforce of about 90,000 employees in 2000.
Line-cost savings of US$1.5 billion will come from network integration, improved technology and renegotiation of more than 2,600 contracts with suppliers, WorldCom said .
The company, which sells service to consumers under the MCI brand, pays local-phone companies to use their lines to complete some calls.
Clinton, Mississippi-based WorldCom said it will reduce office space 26 percent, or by 8.7 million square feet. The company didn't say which offices will be closed.
WorldCom said it will maintain offices in Alpharetta, Georgia; Ashburn, Virginia; Cary, North Carolina; Clinton; Denver; Colorado Springs, Colorado; Richardson, Texas; and Tulsa, Oklahoma. Outside the US, WorldCom said it will continue to have facilities in Hong Kong and the UK.
Shares of WorldCom fell 1 cent to 14 cents at 3:59pm New York time in over-the-counter trading. They are down from a high of US$62 in June 1999, representing a reduction of more than US$100 billion in stock-market value. WorldCom bonds rose 1 cent to 23 cents on the dollar, traders said.
Last month, Capellas said WorldCom would formulate a cost-cutting plan by Feb. 1 and complete it two months later. At the time, he predicted line-cost reductions of 4 percent.
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