The judge overseeing MCI's bankruptcy approved the company's plan to emerge from the biggest bankruptcy in US history, a financial reorganization that will pay back most creditors US$0.36 on the dollar and erase US$35 billion of debt.
The ruling Friday by US Bankruptcy Judge Arthur Gonzalez comes 16 months after the company formerly known as WorldCom slid into disgrace after revealing it had fabricated US$11 billion in profits.
It wasn't immediately clear when the plan and MCI's emergence from bankruptcy protection would officially take effect. Judges often set an effective date between one and three months after approval.
The reorganization plan is designed to give MCI a fighting chance at survival in an industry besieged by fierce price wars, sluggish business spending and competing technologies such as cell phones and Internet-based calling.
But a freshly cleaned financial slate and a new name will not, however, suddenly sanitize the company's sullied reputation or wipe away its legal troubles, including charges of securities fraud in the company's accounting deception and a federal investigation into the company's telephone call routing practices.
Still, MCI emphasized Friday that it is a much different company now.
"We have spent the past 10 months building a world-class board of directors, recruiting seven new key executives, including a CFO [chief financial officer], a COO [chief operating officer], a general counsel and a chief ethics officer, and instituting a standard-setting corporate governance structure," said Michael Capellas, MCI chairman and chief executive.
MCI remains the nation's second biggest provider of long-distance and other communications services for consumers and businesses.
But contrary to the conventional wisdom, a nearly debt-free MCI will not be free to start slashing away at its troubled rivals AT&T and Sprint by cutting prices.
"Their profit margins are so tight, much lower than others, that basically any price war will make further erosion on their top line revenues and will immediately get them into negative margins," said Muayyad Al-Chalabi, managing director for RHK, a telecommunications consulting and research firm.
On the cost side, 85 percent of MCI's revenues are eaten up by operating expenses that management would be hard-pressed to trim. The work force, for example, has already been reduced by more than a third to 55,000 employees, down from 85,000 before the bankruptcy.
In the meantime, analysts expect that MCI will need to ramp up its investment in technology to upgrade its network and services.
MCI estimates that this year's total investment in the company's huge voice and data networks and other technological upgrades will total US$1.2 billion. RHK estimates it at closer to US$700 million.
Taiwanese suppliers to Taiwan Semiconductor Manufacturing Co. (TSMC, 台積電) are expected to follow the contract chipmaker’s step to invest in the US, but their relocation may be seven to eight years away, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. When asked by opposition Chinese Nationalist Party (KMT) Legislator Niu Hsu-ting (牛煦庭) in the legislature about growing concerns that TSMC’s huge investments in the US will prompt its suppliers to follow suit, Kuo said based on the chipmaker’s current limited production volume, it is unlikely to lead its supply chain to go there for now. “Unless TSMC completes its planned six
Intel Corp has named Tasha Chuang (莊蓓瑜) to lead Intel Taiwan in a bid to reinforce relations between the company and its Taiwanese partners. The appointment of Chuang as general manager for Intel Taiwan takes effect on Thursday, the firm said in a statement yesterday. Chuang is to lead her team in Taiwan to pursue product development and sales growth in an effort to reinforce the company’s ties with its partners and clients, Intel said. Chuang was previously in charge of managing Intel’s ties with leading Taiwanese PC brand Asustek Computer Inc (華碩), which included helping Asustek strengthen its global businesses, the company
Power supply and electronic components maker Delta Electronics Inc (台達電) yesterday said second-quarter revenue is expected to surpass the first quarter, which rose 30 percent year-on-year to NT$118.92 billion (US$3.71 billion). Revenue this quarter is likely to grow, as US clients have front-loaded orders ahead of US President Donald Trump’s planned tariffs on Taiwanese goods, Delta chairman Ping Cheng (鄭平) said at an earnings conference in Taipei, referring to the 90-day pause in tariff implementation Trump announced on April 9. While situations in the third and fourth quarters remain unclear, “We will not halt our long-term deployments and do not plan to
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
RSS