IDT bids USD5bn for WorldCom units
3 July 2002 -- Newark, NJ-based telecoms firm IDT has offered USD5bn to buy WorldCom's MCI residential long-distance business and small-business services unit plus its MFS local telephone company. IDT said it could bring other partners in on the deal, which would need support from WorldCom's creditors (who are owed about USD30bn).
WorldCom is the USA's number-2 long-distance company, but faces delisting from NASDAQ, bankruptcy and possible network shutdown due to defaulting on its credit lines. This came after revealing that fired chief financial officer Scott Sullivan had allegedly mis-accounted USD3.85bn worth of business expenses in 2001 and early 2002 (such as costs to access local phone networks) as capital expense accounts.
WorldCom plans to restate earnings after KPMG audits its financial records. But, in the meantime, the USA's Securities and Exchange Commission has charged WorldCom with fraud, and a congressional hearing is set for 8 July.
"It is highly unlikely we would consider selling our core assets, such as MCI or our local business. Certainly non-core assets like wireless resale are on the table," said WorldCom's Brad Burns. WorldCom also has said that it aims to sell its Latin American assets.
WorldCom's CEO John Sidgmore is negotiating with banks to avoid bankruptcy by restructuring debt and seeking a further USD1bn in loans. WorldCom has about USD2bn in cash, and Sidgmore pledged that its existing services - including its Internet backbone that handles roughly half the Internet's traffic - will remain operational and secure.
However, Sidgmore says that, if the debt is not restructured, WorldCom would have problems meeting a USD2bn interest payment due in early 2003. IDT CEO Howard Jonas has accused Sidgmore of ignoring his proposal and trying to use scare tactics to persuade the US government to pressure WorldCom's bankers into extending credit.
