Mci Case Study Essay Example
MCI Case Study
The likely level of MCI's needs for external financing over the next five years is $3,644 (See Exhibit 1 for more details).
We could reasonably expect MCI's needs for external financing to vary. MCI launched a trial product with Execunet in Denver, Colorado. This product offered long-distance service to residential homes. The product was a success in Denver. Because of the success of the launch, MCI has the ability to grow quickly in this market. Because MCI has minimal historical data on revenues generated by the Execunet product, forecasting future revenues and growth will be difficult.
Another factor making external financing forecasts difficult is the antitrust suit between AT&T and the Justice Department in January of 1982. This settlement says that by 1986 independent local telephone companies must provide equal quality of access to all competing long distance providers. Originally MCI was paying less to their long distance providers but were limited in many regions. AT&T had access to more long distance providers but was required to pay a higher access fee. Now, all providers must provide their services to all companies for the same price.
This means MCI will be able to penetrate the long distance market by offering their services to a broader group; however, they will have to pay a fee higher than the fee they are currently paying. This uncertainty will make external financing needs difficult to forecast. In the face of these uncertainties, it will be difficult to predict MCI's growth in revenue and earnings in FY1984 and beyond.
In June 1972, MCI made their first public offering raised $27.1 million. Then, in 1975, MCI issues more equity raising $8.2 million or about 85 cents per share. The market price at that time was just below a dollar per share so MCI probably thought the issue would not cause a big decrease in stock price. In addition, MCI had exhausted its credit line with banks and they were in negotiations
The likely level of MCI's needs for external financing over the next five years is $3,644 (See Exhibit 1 for more details).
We could reasonably expect MCI's needs for external financing to vary. MCI launched a trial product with Execunet in Denver, Colorado. This product offered long-distance service to residential homes. The product was a success in Denver. Because of the success of the launch, MCI has the ability to grow quickly in this market. Because MCI has minimal historical data on revenues generated by the Execunet product, forecasting future revenues and growth will be difficult.
Another factor making external financing forecasts difficult is the antitrust suit between AT&T and the Justice Department in January of 1982. This settlement says that by 1986 independent local telephone companies must provide equal quality of access to all competing long distance providers. Originally MCI was paying less to their long distance providers but were limited in many regions. AT&T had access to more long distance providers but was required to pay a higher access fee. Now, all providers must provide their services to all companies for the same price.
This means MCI will be able to penetrate the long distance market by offering their services to a broader group; however, they will have to pay a fee higher than the fee they are currently paying. This uncertainty will make external financing needs difficult to forecast. In the face of these uncertainties, it will be difficult to predict MCI's growth in revenue and earnings in FY1984 and beyond.
In June 1972, MCI made their first public offering raised $27.1 million. Then, in 1975, MCI issues more equity raising $8.2 million or about 85 cents per share. The market price at that time was just below a dollar per share so MCI probably thought the issue would not cause a big decrease in stock price. In addition, MCI had exhausted its credit line with banks and they were in negotiations