WorldCom Cuts 2002 Merit Raises

WorldCom Inc. has notified the 30,000 employees in data and Internet division there will be no 2002 merit raises and “some” increase in their benefits. In addition, the long distance and data services company will give eligible employees the opportunity to submit for cancellation outstanding stock options that were granted by WorldCom on Jan. 4, 1999, and Jan. 18 and April 24 of 2000.

In exchange, they will receive new options for an equal number of shares expected to be granted on or about August 15, with an exercise price equal to the closing price for WorldCom group stock on that date. The new options will vest one-third each year, beginning January 1, 2003.

The number of shares to be exchanged is approximately equal to the number of shares normally granted. Eligible employees will have until Feb. 14 to decide whether to participate in the exchange program. According to a WorldCom statement, the exchange program will not require a charge to WorldCom earnings, nor will it have any impact on the total number of shares under outstanding stock options.

WorldCom officials did not speculate on the total cost savings of the moves but, historically, merit raises at the company average approximately four percent per year.

The new economic measures for the Clinton, Miss.-based WorldCom after the telecom giant reported a 44 percent drop in third quarter net income and an 11 percent dip in revenues. The company has also warned of slowing Internet and data group numbers in the fourth quarter and into this year. WorldCom is scheduled to report fourth quarter financial results on Feb. 7.