Mci: Set For More Overseas Calls

In 1993, when the Dow was up to 3600 and investors were flocking overseas, investment manager Wayne Nordberg kept on buying American. His faith in the Dow has paid off. But in spite of the market's sharp runup, value-player Nordberg has remained bullish. He is, in particular, snapping up stocks whose price-earnings ratios have lagged behind the Dow's and whose worth remains unrecognized. One such stock: MCI Communications (MCIC).

The second-largest U.S. long-distance carrier, MCI "is destined to become a global giant in telecommunications, yet the Street is unimpressed," notes Nordberg, partner and head of equity investments at Lord, Abbett & Co., which manages some $18 billion.

MCI's stock has hovered between 20 and 24 all year. Given its 15%-to-20% yearly earnings growth and big goals for global expansion, Nordberg figures it will hit 40 in two years.

Many think a shakeout is overdue in telecommunications and that cash-laden MCI, with revenues of $13.3 billion last year, will either merge with or acquire another long-distance outfit or an information-entertainment company.

Nordberg doesn't discount such a prospect. He believes that MCI will first strike an additional strategic alliance shortly, similar to its deals with British Telecom and News Corp.

Last September, MCI signed an accord for British Telecom to invest $4.3 billion for a 20% voting stake in MCI. The two companies formed a joint venture to provide communications services to multinational companies. And in May, MCI agreed to invest up to $2 billion in News Corp. to create and distribute information and entertainment worldwide.

The Street has frowned on these alliances, partly out of concern over a dilution in MCI's earnings. "But it is exactly that strategy of alliances that will make MCI a leader in global long-distance communications," says Nordberg. Links with British Telecom and News Corp., he explains, give MCI access to Europe and Asia. The News Corp. deal, says Nordberg, will make MCI a player in entertainment software for distribution through satellites and wireless networks.

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