MCI Clears the Decks

The emergence of MCI will cap off a contentious process fraught with opposition from rival telcos such as Verizon (VZ) and AT&T (T). Those companies contended that MCI gained an unfair advantage through the bankruptcy process, by trimming its operations and slashing debt even as other big telecom companies remain burdened with costs.

MCI's move comes as the telecom sector enjoys the beginnings of a long-awaited revival from a deep slump, and it confronts emerging threats such as voice-over-the-Internet technology. MCI's chief executive, former Compaq head Michael Capellas, told investors last month that telcos must embrace these new challenges unless they want to see their business taken by rivals.

Last week big long-distance telcos such as MCI suffered a setback as a federal appeals court handed the big baby Bell local telcos a victory on network pricing rules. The order reversed the cut-rate wholesale prices the Bells were forced to charge rivals that sell local phone service, such as AT&T, Sprint (FON) and MCI.

Though MCI's books are surely cleaner now than they were in the late Ebbers era, the company continues to have difficulty turning a profit in the intensely competitive long-distance and Internet backbone markets it focuses on. MCI posted a loss in December despite a monthly revenue gain.

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