Filed by MCI, Inc.
Pursuant to Rule 425 under the
Securities Act of 1933 and deemed
filed pursuant to Rule 14a-12 of
the Securities Exchange Act of 1934
Subject Company: MCI, Inc.
Commission File No.: 001-10415
The following slides are used in connection with the webcast hosted by MCI,
Inc. and Verizon Communications Inc. on February 14, 2005. The webcast
includes a discussion of operating income before depreciation and amortization (EBITDA). MCI,
Inc. believes that, in addition to GAAP financial measures, the inclusion and discussion
of certain numerical statistics such as EBITDA allows management, investors, and
analysts to fully evaluate its consolidated results of operations. Below is a
reconciliation of EBITDA to operating income for the three-month period ended December
31, 2004:
| Operating income |
$ 434 |
| Depreciation and amortization |
$ 341 |
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| Operating income before depreciation and amortization |
$ 775 |
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Investor Conference Call
February 14, 2005
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"Safe Harbor" Statement
NOTE: This presentation contains statements about expected future events and
financial results that are forward-looking and subject to risks and
uncertainties. For those statements, we claim the protection of the safe harbor
for forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995. The following important factors could affect future results
and could cause those results to differ materially from those expressed in the
forward-looking statements: a significant change in the timing of, or the
imposition of any government conditions to, the closing of the transaction;
actual and contingent liabilities; and the extent and timing of our ability to
obtain revenue enhancements and cost savings following the transaction.
Additional factors that may affect the future results of Verizon and MCI are set
forth in their respective filings with the Securities and Exchange Commission,
which are available at investor.verizon.com/SEC/ and
www.mci.com/about/investor_relations/sec/.
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Note
We urge investors to York, NY , or by request to MCI, Inc., Investor Information
about proxy Additional relations Investors will be able to obtain free copies of
the , or by request to Verizon Communications Inc., _ com/investor Investors may
also obtain free copies of these documents at . com/about/investor directors and
executive officers is available in Verizon's verizon Free copies of MCI's
filings are available at . mci Verizon intends to file a registration statement,
including a proxy statement ofMCI, and other materials with the Securities and
Exchange Commission ("SEC") in connection with the proposed transaction.read
these documents when they become available because they will contain important
information.registration statement and proxy statement, as well as other filed
documents containing information about Verizon and MCI, at www.sec.gov, the
SEC's .Investor Relations, 1095 Avenue of the Americas, 36th Floor,
New10036..Relations, 22001 Loudoun County Parkway, Ashburn, VA 20147.
Verizon, MCI, and their respective directors, executive officers, and other
employees may be deemed to be participants in the solicitation of proxies from
MCI shareowners with respect to the proposed transaction.Verizon'sstatement for
its 2004 annual meeting of shareholders, dated March 15, 2004. annual report on
Form 10-K for the year ended December 31, 2003. Information about MCI's
directors and executive officers is available in MCI's information about the
interests of potential participants will be included in theregistration
statement and proxy statement and other materials filed with the website.www www
SEC.
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Ivan Seidenberg Chairman & CEO
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Drives significant operational efficiencies while creating incremental
revenue opportunities
Offers Next Generation, IP-based product suite to
serve a powerful Enterprise customer base
Continues MCI's heritage of
innovation
Maintains financial flexibility
It's a smart deal a
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Deal Structure
$4.8B of Verizon equity; $488M cash
$1.46B of quarterly & special dividends to
be paid by MCI
Closing Adjustment
Governance
Standard Terms & Conditions
Straightforward & simple deal &
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Michael Capellas President & CEO
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Key Industry Themes
Continued growth in all forms of communication
Computing moving to standard
building blocks
IP is enabling changes in delivery
models
New service opportunities
Industry dynamics changing
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MCI's Competitive Advantage
Extensive IP-Centric Product Portfolio
Tenured Sales Force
Expansive Global Network
Industry- Leading Service Quality
Strong Customer Relationships
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Leading IP Assets & Capabilities
Roots based on data
One of the deepest IP skill-sets in the world
Telecom industry's most expansive global IP
backbone -
$38 billion+ invested in
network
4,500 pops
3.2 million dial modems
130 data centers
6 continents
140+ countries
Innovative culture
Leadership in enterprise networking
* Based on company-owned PoPs
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MCI's Enterprise Business
Global Accounts Dedicated accounts teams in 286 large multinational customers
Government Markets Trained on-site support for complex and ultra-secure
government networks
MCI Services Established practices in customer solutions in managed networks,
security, hosting and contact centers
Commercial Experienced local, full-service account teams in 91 sales offices
across the U.S.
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Focus on Next Generation Services
MANAGED SERVICES
SECURITY
HOSTING
CONTACT CENTERS
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Preliminary Fourth Quarter MCI Results
Revenue of $5 billion, down 2 percent sequentially & 10 percent year-over-year
Enterprise revenue up 1 percent sequentially
Operating income before
depreciation and amortization was approximately $775 million, including the
benefit of incidental items totaling about $270 million
Cash & cash equivalents
& short term investments of $5.5B @ 12/31/04
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Making MCI Stronger
Provides end-to-end products and services, including wireless voice and data
Accelerates technology investments
Broadens customer base
Improves cost
structure
Increases customer confidence Our future is brighter
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Ivan Seidenberg Chairman & CEO
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Network Assets
VZ Wireline 6,600 local Points of Presence Serving 2/3's of the Top 100 MSA's
3.6 million DSL customers 9 million fiber miles 53 Million Access Lines Wireless
America's most reliable wireless network Strong business presence Leading 3G
network 43.8 million customers 269 million licensed PoP's
MCI Wireline 4,500 Points of Presence Presence on 6 continents & in 140+
countries and over 2,800 cities Telecom industry's most expansive global IP
backbone w/ 3.2 million dial modems 100,000 mile fiber optic network 130 Data
Centers Connections to over 100,000 active buildings Most scalable IP network
Tremendous network capabilities
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Superior Account Coverage
VZ w/MCI Powerful account base Robust account coverage Single point of contact
Highly experienced sales force Optimized approach to key verticals
VZ Quality tenured telco Strong CPE experience Strong Finance & Public
Sectorrelationships Metro optical/ethernet
MCI Quality tenured Global Sales force Strong Enterprise & Federal Government
account relationships Managed Solutions Sales Experience IP technical expertise
Dramatically improves go-to-market capability
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Breadth of Portfolio
Premise Local Area Networks Routers & Switches PBX & IP PBX Centrex & IP Centrex
Storage equipment Security devices Wi-Fi
Access PRI DS-1 & DS-3 Fast Packet Ethernet SONET/CWDM FTTP Wireless Voice
Wireless Data (EVDO)
Transport Fast Packet IP-MPLS SONET DWDM Cellular/CDMA
Applications IP Voice Mobility Managed Services Security Storage Hosting
End to End Managed Services
& Wireless Wireline
MPLS Backbone & OSS
Seamless migration to Next Gen IP products
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Enterprise Customer Benefits
Supplier Profile
ILECs/CLECs IXCs Wireless Equipment Manufacturers System Integrators VARs
Professional Services
Customer Challenges Complexity Cost Procurement Integration Migration Multiple
account teams
Customer Benefits Simplicity Efficiency Packages Solutions Evolution Single
Point of Accountability
Simplified value proposition
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Savings & Benefits
Network & IT Savings
SG&A Savings
Revenue Opportunities
Network Investment Opportunities
Improving our scale & cost position
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Doreen Toben Chief Financial Officer
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Driving Network Efficiency
Network opportunities
Network efficiency
Migrating services on net
Out-of-Franchise investment
Savings opportunities
Significant network efficiencies
Engineering
Facilities
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SignificantOperational Initiatives
Information Technology
Applications, licensing & contracts
Data Center efficiency
Real Estate
Wholesale
Procurement
Improve vendor efficiency
Head count reductions primarily in support functions
Lowering our cost position
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Revenue Opportunities
Stability improves MCI base performance & retention rates
Bundling across broad portfolio creates attractive value proposition
Network cost position enables competitive pricing/margin performance
Unparalleled fiber availability for optical and ethernet
Best IP backbone drives IP services growth
Managed services strength leverages high growth market opportunity
Wireless Enterprise opportunities increase
....while driving new revenue opportunities
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Synergy Impact
$1 billion run rate in Year 3 & beyond
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Consideration
(In millions except for per share data)
Aggregate
Per Share
Effective Value to MCI Shareholders $ 20.75 $ 6,746
Less: Quarterly & Special Cash Dividend ($ 4.50) ($ 1,463)
Cash Merger Consideration ($ 1.50) ($ 488)
Verizon Stock to be Issued $ 14.75 $ 4,795
Verizon Stock Price @2/11/05 $ 36.31
Exchange Ratio 0.4062
Verizon Shares to be Issued 132.1
% of Pro Forma Outstanding Verizon Shares 4.5%
Equity & cash transaction &
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Key Transaction Terms
Assumption of Net Debt - Targeted @ $4B
Closing Adjustment for Contingent Liabilities
Bankruptcy, State & International Taxes
Downward price adjustment if claims > $1.725B
Dollar for Dollar price adjustment
Customary "Other Terms & Conditions"
Regulatory approvals required
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Financial Summary
Earnings - (Excluding transition costs & any intangible amortization)
Full Year 1 ~$0.10 dilutive
Full Year 3 essentially break even
Free Cash Flow
Accretive in Full Year 3
Savings
$7B NPV
Efficiencies driven primarily by expense savings
Targeted reduction of 7,000 employees
Transition Costs
Expense - $1.0B - $1.5B through Full Year 3
CAPEX - ~$2B through Full Year 3
Integration activities largely complete by Full Year 3
Capital Structure
Minimal new share issuance
Minimal balance sheet impact while maintaining financial flexibility
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Summary
Straightforward, simple & smart deal
Acquire a Next Gen, IP-based product suite
Improved network capabilities, customer service & account coverage
Enterprise customers realize a simplified value proposition
$1B run rate of savings by Full Year 3
Maintain financial flexibility
Future stability for MCI
Create revenue opportunities
Strategic acquisition
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* * *
FORWARD-LOOKING STATEMENTS
This document contains statements about expected future events and financial results
that are forward-looking and subject to risks and uncertainties. For those statements, we claim the
protection of the safe harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. The following important factors could affect future results and could
cause those results to differ materially from those expressed in the forward-looking statements:
a significant change in the timing of, or the imposition of any government conditions to, the closing
of the transaction; actual and contingent liabilities; and the extent and timing of our ability to
obtain revenue enhancements and cost savings following the transaction. Additional factors that may
affect the future results of MCI and Verizon are set forth in their respective filings with the Securities
and Exchange Commission, which are available at investor.verizon.com/SEC/ and www.mci.com/about/investor_relations/sec/.
Additional Information and Where to Find It
In connection with the proposed transaction, a registration
statement, including a proxy statement of MCI, and other materials will be
filed with the Securities and Exchange Commission (“SEC”). We urge
investors to read these documents when they become available
because they will contain important information. Investors will be able to
obtain free copies of the registration statement and proxy statement, as
well as other filed documents containing information about MCI and Verizon,
at www.sec.gov, the SEC’s
website. Investors may also obtain free copies of these documents at www.verizon.com/investor, or
by request to Verizon Communications Inc., Investor Relations, 1095 Avenue of the Americas, 36th
Floor, New York, NY 10036. Free copies of MCI’s filings are available
at www.mci.com/about/investor_relations, or by request to MCI, Inc., Investor
Relations, 22001 Loudoun County Parkway, Ashburn, VA 20147.
Participants in the Solicitation
MCI, Verizon, and their respective directors, executive officers, and other employees
may be deemed to be participants in the solicitation of proxies from MCI shareowners with respect
to the proposed transaction. Information about MCI’s directors and executive officers is available
in MCI’s annual report on Form 10-K for the year ended December 31, 2003. Information about
Verizon’s directors and executive officers is available in Verizon’s proxy statement for
its 2004 annual meeting of shareholders, dated March 15, 2004. Additional information about the interests
of potential participants will be included in the registration statement and proxy statement and
other materials filed with the SEC.