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MFS COMMUNICATIONS REPORTS 52 PERCENT REVENUE GAIN IN THIRD QUARTER; MARKET CHANGES ACCELERATE GROWTH PLANS

 OMAHA, Neb., Nov. 1 /PRNewswire/ -- MFS Communications Company, Inc. ("MFS") (NASDAQ-NMS: MFST) today reported that revenues for its third quarter, ended Sept. 30, 1993, increased 52 percent to $42.5 million, compared to $27.9 million for the same period last year.
 Telecommunications Services segment revenues increased 50 percent to $18.5 million from $12.3 million in the third quarter of 1992. Annualized recurring revenue increased 54 percent to $72.0 million at Sept. 30, 1993, versus $46.8 million at Sept. 30, 1992. Network Systems Integration and Facilities Management Services segment revenues increased 54 percent to $24.0 million from $15.6 million in the third quarter of 1992.
 "As never before, fundamental change is reshaping the telecommunications industry -- regulatory change, technological change, changing customer needs and changing competitive alliances," said James Q. Crowe, MFS chairman and chief executive officer. "The quickening pace of change creates more opportunities to serve our business customers. We have therefore accelerated our network deployment plans. Our strategic plan had called for expansion to 28 cities, and now targets 60 to 70 cities over the next three to five years," said Crowe.
 MFS announced the development of new fiber optic networks in three additional cities during the third quarter. These included a 151-route mile network serving the data communications-intensive San Jose-Silicon Valley metropolitan area; a 50-route mile network in Tampa, marking the company's entry into the fast-growing Florida marketplace; and a 10- route mile network in London's financial district, making MFS the first Competitive Access Provider to expand overseas. Initial service on these new networks is expected during early 1994.
 Expansion of MFS' existing networks also continued. For the first nine months of 1993, MFS' network route miles grew 35 percent, fiber miles grew 44 percent, the number of buildings served grew 30 percent and circuits in service grew 44 percent.
 Cash Flow Performance
 For the nine months ended Sept. 30, 1993, MFS' competitive access business generated approximately $15.4 million of EBITDA (Earnings Before Interest, Income Taxes, Depreciation and Amortization), a standard industry measure of operating cash flow. For the quarter, EBITDA for the Telecommunications Services segment was approximately ($900,000), compared to approximately $1.0 million for the same period last year. The decrease resulted primarily from expenses incurred during the third quarter of 1993 in excess of $7 million directly related to the MFS Datanet and MFS Intelenet service offerings.
 EBITDA for the Network Systems Integration and Facilities Management Services segment was $1.2 million for the third quarter of 1993. Backlog for this segment stood at approximately $65 million at Sept. 30, 1993. Approximately $3.5 million of revenue for this segment in the third quarter of 1993, and approximately $16 million of backlog, results from the purchase of the remaining partnership interest in the United Kingdom operations not previously owned by MFS.
 Regulatory Actions
 Actions by both state and federal governments during the quarter continued to open new markets to competition. In August, the Federal Communications Commission expanded on its landmark interconnection order of Sept. 17, 1992, by opening to competition the portion of the local exchange network that carries interstate calls between local telephone company switches and long distance carriers. "The FCC's decision opens up approximately $800 million of this current $4.2 billion market to competition," Crowe said.
 Significant regulatory developments also continued at the state level. Addressing a formal complaint filed on behalf of MFS Intelenet in July, the New York Public Service Commission in early October recognized MFS Intelenet as a local telephone company and granted MFS Intelenet non)discriminatory access to telephone numbers. This and related actions constitute a major step toward establishing MFS Intelenet as a local carrier with status equal to New York Telephone (NYT), a standing known in the industry as "co-carrier" status. "Attainment of co-carrier status will ultimately allow MFS Intelenet to reduce its costs to provide competitive telecommunications services to small and medium-sized businesses," said Crowe. The New York Commission also encouraged NYT to meet with MFS Intelenet and others to develop mutual agreements regarding compensation by NYT for termination of calls on competing networks. Currently, MFS is not compensated for terminating such calls.
 MFS Datanet, MFS Intelenet Establish Market Firsts
 In August, MFS Datanet, which offers high-speed data communications services to business and government customers, unveiled the first national Asynchronous Transfer Mode (ATM) network. ATM technology makes it possible to send large quantities of mixed voice, data and video information across the country as quickly and easily as sending it from one computer to another within the same office. "Our ATM network enables us to meet the needs of businesses to transmit multimedia information simply and reliably, across town or across the nation," said Crowe.
 In early October, MFS Intelenet premiered its integrated telecommunications services in New York City. "We think MFS Intelenet solves a critical problem for small and medium-sized businesses by offering full phone service from one source -- local and long distance service, equipment and facilities management, a single bill and a single source for answers to all their telecommunications questions," said Crowe. MFS anticipates introducing MFS Intelenet services in several other cities in 1994.
 On Sept. 14, 1993, the company completed a primary offering of 4.6 million shares of common stock. At the end of the quarter, MFS had over $515 million in cash and marketable securities. "MFS intends to use these funds to aggressively expand our networks and service offerings, capitalizing on the evolving competitive environment in telecommunications," said Crowe.
 MFS COMMUNICATIONS COMPANY, INC.
 Consolidated Statements Of Operations
 (Unaudited, dollars in thousands, except per share data)
 Period ended Three Months Nine Months
 Sept. 30 1993 1992 1993 1992
 Revenue $ 42,451 $ 27,922 $102,784 $ 76,018
 Costs and expenses:
 Operating expenses 33,082 18,526 76,780 52,665
 Depreciation and
 amortization 9,546 5,339 24,285 14,980
 General and
 administrative expenses 9,035 5,450 23,459 15,820
 Total 51,663 29,315 124,524 83,465
 Loss from operations (9,212) (1,393) (21,740) (7,447)
 Other income (expense):
 Interest income 2,817 85 4,499 182
 Interest expense (7) (233) (66) (771)
 Other (302) (131) (21) (214)
 Total other
 income (expense) 2,508 (279) 4,412 (803)
 Loss before income taxes (6,704) (1,672) (17,328) (8,250)
 Income tax
 benefit (provision) 1,993 (220) (5,456) (440)
 Net loss $ (4,711) $ (1,892) $(11,872) $(8,690)
 Net loss per common
 and common equivalent
 share $ (.08) $ (.04) $ (.24) $ (.20)
 Weighted average
 common and common
 equivalent shares
 outstanding 57,305,484 44,085,000 49,811,468 44,085,000
 Consolidated Balance Sheet
 (Unaudited, dollars in thousands, except per share amounts)
 Sept. 30, 1993
 ASSETS
 Current Assets:
 Cash and cash equivalents $ 38,810
 Marketable securities, at lower of cost or market 476,447
 Accounts receivable 11,955
 Costs and earnings in excess of billings on
 uncompleted contracts 2,358
 Deferred income taxes 1,171
 Other current assets 10,271
 Total current assets 541,012
 Networks and equipment 322,776
 Less accumulated depreciation 56,090
 Networks and equipment, net 266,686
 Other assets, net 74,195
 Total assets $ 881,893
 LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities:
 Accounts payable $ 11,013
 Due to affiliates, net 8,555
 Current portion of long-term debt 25
 Accrued costs and billings in excess
 of revenue on uncompleted contracts 15,840
 Accrued payroll 4,907
 Other current liabilities 7,868
 Total current liabilities 48,208
 Long-term debt, less current portion 151
 Other liabilities 5,080
 Deferred income taxes 8,276
 Minority interest 7,780
 Stockholders' equity:
 Common stock, $.01 par value. Authorized
 125,000,000 shares: 61,255,439 outstanding. 613
 Additional paid-in capital 935,475
 Foreign currency adjustment 30
 Deferred charge (6,268)
 Accumulated deficit (117,452)
 Total stockholders' equity 812,398
 Total liabilities and stockholders' equity $ 881,893
 Results Of Operations
 (Unaudited)
 Period ended Three Months Nine Months
 Sept. 30 1993 1992 1993 1992
 Revenue:
 Telecommunications
 services $ 18,483 $ 12,339 $ 49,943 $ 34,288
 Network systems
 integration and facilities
 management services 23,968 15,583 52,841 41,730
 Total $ 42,451 $ 27,922 $102,784 $ 76,018
 Operating Income (loss):
 Telecommunications
 services $(10,465) $ (4,353) $(23,846) $(13,423)
 Network systems
 integration and facilities
 management services 1,091 3,078 1,964 5,980
 Total $ (9,374) $ (1,275) $(21,882) $(7,443)
 EBITDA (A):
 Telecommunications
 services $ (902) $ 1,006 $ 191 $ 1,627
 Network systems
 integration and facilities
 management services 1,236 2,940 2,354 5,906
 Total $ 334 $ 3,946 $ 2,545 $ 7,533
 (A) EBITDA, or earnings before interest, income taxes, depreciation and amortization, is a standard industry measure of operating cash flow.
 Benchmark Operating Statistics
 As of
 Sept. 30,
 Fiscal Year Ended: 1989 1990 1991 1992 1993
 Metro. Areas 8 9 12 14 14
 Networks 8 9 14 21 23
 Circuits in Service 60,483 173,958 465,420 589,130 849,420
 Buildings Connected 128 226 695 1,101 1,436
 Route Miles 49 127 373 858 1,159
 Fiber Miles 5,780 10,359 22,982 38,595 55,431
 -0- 11/1/93
 /CONTACT: Josh Howell or Steve Ingish of MFS, 708-218-7316/
 (MFST)


CO: MFS Communications Company, Inc. ST: Nebraska IN: TLS SU: ERN

MP -- NY023 -- 9039 11/01/93 10:06 EST
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