Bankrupt telco

MCI

posted soggy September results Monday, citing "continued softness in the consumer markets and pressure on long-distance rates in business markets."

The report comes just weeks after a federal judge

approved MCI's reorganization plan, clearing the way for the nation's No. 2 long-distance player to rejoin the fray in an industry beset by falling prices and ever-escalating competition. Some observers have

insisted that a long-anticipated wave of consolidation could sweep the old-line telcos once a healthy MCI vaults back onto the scene, an event that's expected by year-end.

Ashburn, Va.-based MCI posted a $35 million loss for September on revenue of $1.95 billion. That compares with a $132 million profit for August on revenue of $2.1 billion, though the company noted that the results in the two periods were affected by one-time items including reorganization costs. The company also said that "adjusting for the settlement and asset sales, September cash generation was in line with prior months."

Weak results are nothing new to telecom investors. For years the consumer long distance and local phone businesses have been eroding steadily, pressuring the competitors in those fields to tighten their belts. Just the last week has seen all the big three Baby Bell local phone companies roll out plans that point toward broad job cuts. For instance,

Verizon

(VZ) - Get Report

said Monday that some 21,000 workers would

take buyout offers, allowing the New York company to slash its headcount by 10%.

Still, some observers expect a refurbished, rebalanced MCI to make a splash when it resumes regular operations in 2004. Analysts note that the company will be far less debt-burdened than its peers, potentially giving it advantages that it can exploit in the capital markets.

For now those days remain off in the distance, however. Based on the company's confirmed reorganization plan, holders of WorldCom preferred stock, WorldCom group common stock and MCI group common stock won't receive any value upon MCI's emergence from bankruptcy proceedings. Pink sheets-listed shares of MCI, which have traded as high as 35 cents in recent months, closed Monday at a nickel each.