The tight-fisted CEO is remaking MCI in WorldCom's image

WorldCom Inc. CEO Bernard J. Ebbers didn't waste any time in showing MCI
Communications Corp.'s senior brass that the free-spending days of the
second-largest long-distance company were over. When he summoned MCI's top
20 executives to a powwow in Destin, Fla., last July-two months before
the two companies merged-he gave them several weeks' notice. Why? He wanted
the execs, who were accustomed to plush corporate jets and first-class
comfort, to scrounge up discount airfares. When they got there, more
surprises awaited: Instead of finding the usual company limos that would
whisk them to their hotels, they had to elbow their way to the rental-car
counter. No buffet was set up for their arrival. And they had to double up
in hotel rooms.

Ebbers-known as "Bernie" throughout the industry-was just as welcoming.
First on the meeting's agenda: He warned that anyone who left the room
during the presentation couldn't return until the break. Then he told them
that under the WorldCom regime, they would have to submit monthly revenue
statements-or "monrevs"-so he personally could police their spending.
"It was a tough change," says one MCI exec.

Since WorldCom completed its $37 billion acquisition of MCI, Ebbers has
brought a new slim-fast management approach to the long-distance company.
To pay for the deal, he promised Wall Street that he would slash $2.5
billion in costs, rising to $5.6 billion by 2002. About half the savings
in 1999 would come from putting their customers' phone and Internet traffic
on each other's networks to avoid leasing links from other companies.
What's more, Ebbers wants to ax MCI's overhead-one of the industry's cushiest at
30% of revenues-to about 23% this year. As part of that effort, MCI
WorldCom Inc. has laid off 2,215 workers so far.

But there are some who fret that Ebbers will take his penny-pinching ways
too far. MCI veterans say that if the cuts deepen, it could destroy the
company's key strength-the marketing magic that helped break AT&T's
monopoly. MCI is simply different from WorldCom, they argue. While
WorldCom, based in Jackson, Miss., has focused on small to midsize
businesses, Washington-based MCI excels at snagging consumers and high-end
corporate customers-markets where you need to spend money to make money.
"The world has changed for Bernie," says a former MCI exec. The company
insists Ebbers won't cut core sales and marketing-he'll cut back office
staff instead.

CRITICAL WEAKNESS. Just as important, Ebbers lacks several key strategic
assets even after combining the two companies. One critical weakness: MCI
WorldCom has no presence in the booming wireless industry. Ebbers has
resisted buying a wireless company because the service hasn't been
important to business customers. But analysts think the service is too
popular to ignore any longer. Moreover, MCI WorldCom lacks a broad
local-service offering for residential customers. Even in New York, where
the company said it would offer local service, it has taken only minor
steps. "Watch what they do, not what they say," says James G. Cullen,
president of Bell Atlantic Corp.

Still, Ebbers' high-stakes gamble to take over MCI seems to be paying off.
On Feb. 11, MCI WorldCom reported fourth-quarter revenues surged 14%, to
$8 billion for the combined companies, while net income hit $428 million
after a loss in the year-earlier period. Investors sent the stock soaring
5.5% that day, to $80.44. "We are continuing to gain confidence in our ability
to execute," Ebbers told analysts at the time. Indeed, WorldCom
outperformed every other major phone company last year, boosting its stock
137%, vs. 60% for Sprint Corp. and 24% for AT&T .

And Ebbers doesn't plan on slowing down. He has positioned MCI WorldCom to
capitalize on the fastest-growing segments of the telecom industry-data
and international services. With the globe's largest Internet backbone,
MCI WorldCom's data business is on a pace to triple, to $23.2 billion, by
2002, estimates Sanford C. Bernstein & Co.'s analyst Tod A. Jacobs. By
contrast, AT&T's data revenues will be $13.9 billion, according to Jacobs.
Foreign shores may be just as lucrative. By building its own communications
networks overseas, MCI WorldCom is expected to boost international sales
40% annually, to about $5 billion, in 2002. "They're going to go through
Europe and the rest of the world and take market share from the fat and
happy incumbents," says Jeffrey Heil, director of equity investments at
the University of California, a large shareholder.
A key advantage in the U.S. and abroad is that MCI WorldCom is determined
to build its own network-and not rely on competitors like the Baby Bells.

"We don't want to negotiate with 48 other phone companies to do
something," says John W. Sidgmore, MCI WorldCom's vice-chairman.
BUY 'N' SLASH. Ebbers' secret to success is tried and true. Since the
former high school basketball coach got into the phone business in 1983
with the purchase of tiny long-distance reseller LDDS, he has bought 67
phone companies, changing their name to WorldCom in 1995. After buying
companies, he slashes expenses and consolidates all traffic on a single
network. Small wonder that his first yacht was named Aquasitions.
Ebbers is applying the same bottom-line philosophy at MCI WorldCom. On
Sept. 27, the new company's top sales managers gathered at the America's
Center in St. Louis. The folksy Ebbers told stories to help set the
priorities for the new company. He said that one employee who is a single
mother had been able to send her kids to college because of her WorldCom
stock. Another woman had recently been able to buy a house in a better
neighborhood thanks to her WorldCom shares. The point: Employees should
focus on boosting shareholder returns. He then told them that everyone
would receive stock options.

The new ethos of sacrificing expenses for profits is spreading throughout
the organization. Ebbers sold three of MCI's five corporate jets and
eliminated company cars for everyone but himself and Chairman Bert C.
Roberts Jr., the former MCI chairman. And at the end of last year, the
water coolers disappeared from MCI's headquarters in Washington. "It sent
a signal that this is not the old MCI," says one former MCI exec. While
some employees feel such trivial cost-cutting is silly, many with new
stock options in hand are in favor of trimming the fat.
It helps that Ebbers' down-to-earth attitude has made him popular among
workers. Often clad in jeans and cowboy boots, the CEO drops in
unannounced to MCI employees' offices for an informal hello-something that
MCI's Roberts didn't do. One secretary mistook Ebbers for the fax-machine
repairman.

He doesn't live like a typical CEO, either. He likes to hang out with
friends in Jackson at casual restaurants like Tico's Steakhouse. The
57-year-old divorce is living temporarily in a modest double-wide trailer
home on his soybean farm while he's building a house. He rides his tractor
for fun. His prime indulgences are a new yacht, called Countach, and an
enormous tract of land in British Columbia.

Ebbers' cowboy ways may change how MCI treats customers. In the past, MCI
sought big-name accounts such as NASDAQ for the credibility and the
brand-building these projects brought. But under WorldCom, these deals may
be evaluated on whether they haul in enough dough. "Large deals are
having to be justified purely on hard numbers," says an MCI exec who
recently left.

The cultural changes are likely to lead to the departure of some key MCI
staffers. Insiders question the future of Timothy F. Price, former MCI
president and now CEO of MCI WorldCom's communications business. While
Price has been a champion of expensive sales promotions, Ebbers may pull
the plug on such goodies, including the MCI Classic PGA tournament. The
contrast in styles has led to widespread rumors that Price is on his way
out. The company insists nothing is amiss.

As MCI WorldCom hits the rocky post-honeymoon phase, telecom veterans
think Ebbers should keep some of the old MCI. "I hope the culture that
emerges will be a balance between the two," says former MCI exec Stephen
Von Rump. So far though, MCI WorldCom is looking a lot more like WorldCom than
like MCI.

By Catherine Yang in Washington, with Peter Elstrom in New York