MCI says its net income could shrink by $250 million over a three-year period if it is prevented from bidding on contracts with the federal government until next summer.
The U.S. General Services Administration has proposed prohibiting MCI from bidding on new contracts with the federal government and renewing existing contracts.
In a filing Monday with the Securities & Exchange Commission, MCI said the proposed debarment would lower net income by an estimated $38 million over a three-year period if the company wasn’t allowed to compete for new contracts and renew existing ones until Nov. 1.
Under this scenario, MCI projected net income of $527 million, $1.057 billion and $1.179 billion for 2003, 2004 and 2005, respectively.
MCI said its net income would decline by $250 million over a three-year period if the company cannot compete for contracts until July 1, 2004. Assuming this date, MCI said net income would total $527 million, $970 million and $1.054 billion for 2003, 2004 and 2005, respectively.
The bankrupt phone company cautioned its projections are based on a number of assumptions about its future performance.
MCI could be debarred from bidding on new federal contracts for up to three years, although GSA has not made a final ruling on the matter. Meantime, MCI is prevented from competing for new contracts.
Citing reasons for the proposed debarment, GSA said MCI “lacks the necessary internal controls and business ethics.”
MCI has appointed a number of new executives and implemented several policies to clean up its reputation following an immense accounting scandal that forced the company to file the largest bankruptcy in U.S. history. The company also is recruiting a chief ethics officer.
In a conference call with reporters following the GSA announcement, MCI Chairman and CEO Michael Capellas said the company generates 6.3 percent of business through the public sector. He declined to assign a dollar figure.
MCI expects to emerge from bankruptcy this fall. A confirmation hearing on its reorganization plan is scheduled Sept. 8 before the U.S. Bankruptcy Court for the Southern District of New York. Capellas said the proposed debarment does not affect the confirmation hearing.
