Filed by Verizon Communications Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Subject Company: MCI, Inc.
Commission File No.: 001-10415
Investor Conference Call
February 14, 2005
“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
Verizon intends to file a registration statement, including a proxy statement of MCI, and other materials with the Securities and Exchange Commission (“SEC”) in connection with the proposed transaction. 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 Verizon and MCI, 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.
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. 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. 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. 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.
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Ivan Seidenberg Chairman & CEO
Strategic Overview
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
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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
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
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
Strong Finance & Public Sector relationships Quality tenured telco sales force Strong CPE experience Metro optical/ethernet expertise
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
Wireline & Wireless
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
Driving Network Efficiency
Network opportunities
Network efficiency Migrating services on net Out-of-Franchise investment
Savings opportunities
Engineering Facilities
Significant network efficiencies
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Significant Operational 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 portfolio 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
~ $500M
Wage
Non-Wage
~$750M
Wage
Non-Wage
~ $1,000M
Wage
Non-Wage
Full Year 1 Full Year 2 Full Year 3
$1 billion run rate in Year 3 & beyond
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Consideration
(In millions except for per share data)
Per Share
Aggregate
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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Verizon Communications Inc. (Verizon) intends to file a registration statement, including a proxy statement of MCI, Inc.
(MCI), and other materials with the Securities and Exchange Commission (SEC) in connection with the proposed transaction. 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 Verizon and MCI, 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.
Verizon, MCI, and their respective directors, executive officers, and other employees may be deemed to be participants in the
solicitation of proxies from MCI shareholders with respect to the proposed transaction. 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. 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. 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.
NOTE: 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 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/.