Ebbers quits as troubles mount at WorldCom

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The Independent Online

Huge debts, plummeting share values and investor anxiety finally caught up with telecoms buccaneer Bernard Ebbers yesterday as he announced he was stepping down as the president and chief executive of his deeply troubled creation, WorldCom.

His decision capped what has been an agonising and humiliating fall from grace for a man who built one of the world's top communications giants from a tiny discount service provider, named LDDS, which he bought in his native Mississippi back in 1985.

Mr Ebbers, 60, who built his empire through a series of stock-fuelled acquisitions – over 15 years, he used equity to buy no fewer than 60 companies – was at the peak of his powers in 1997 when he stunned the industry by outbidding British Telecom to acquire the number two US long-distance provider, MCI Communications.

Replacing Mr Ebbers is vicechairman John Sidgemore, who until recently was head of the company's internet division, UUNET. Wall Street will watch to see if he can salvage debt-ridden WorldCom or seek someone to buy it. Bert Roberts, the former MCI chief, will remain as chairman.

While the pressure on Mr Ebbers to release the reins was overwhelming, the announcement nonetheless shocked many. "I was stunned quite frankly, but I think it's good for the industry," said one Manhattan fund manager, who declined to be named.

The denouement began with a crisis meeting of the company board on Friday. Talks about its future continued into Saturday and Mr Ebbers decided to quit on Monday.

WorldCom is struggling with $30bn of debt. The carrier, which also faces stiffening competition and global economic uncertainty, has to pay about $1bn in interest annually and has more than $4bn in principal payments due next year.

The crisis at the carrier became still worse when investors dumped its stock on Monday, dragging down WorldCom shares to near the $2 level. In 1999, the stock price reached its zenith at $64. Shares rose slightly on news of Mr Ebbers' departure.

Making matters worse, the Securities and Exchange Commission is conducting an investigation into WorldCom's lending and accounting habits. The attention of regulators will focus partly on personal loans extended by the company to Mr Ebbers himself.

The normally brash entrepreneur was forced to turn to his own company for help because he made the mistake of buying so much of its stock when it was at its priciest. He has reportedly taken about $366m in loans. As of 19 April, he still owed WorldCom $167m, according to the company's own filings. He has promised to pay everything back but has not publicly said when that will happen.

Fortunes began to turn for Mr Ebbers in 1999 when he engineered a daring takeover of another giant American carrier, Sprint. He flew too close to the sun that time, however, and in 2000 the $129bn deal was scuppered by the government on competition grounds. Shares in WorldCom have been on a downwards trend ever since.

Since then, the deal-making has dwindled and so has WorldCom's earnings growth. In April, the company said it was eliminating 3,700 jobs in the United States, or about 4.4 per cent of its global work force, to better align costs with projected revenue.

Some saw the removal of Mr Ebbers from the picture as a step towards selling WorldCom, possibly to one of America's Baby Bell carriers. Mr Sidgemore gave no such hint, however.