ANCHORAGE - General Communication Inc. expects to write off $10 million to $20 million as bad debt because of WorldCom Inc.'s bankruptcy filing.
WorldCom, the country's second-largest telephone and data services company, owns a 10 percent stake in GCI and provides 17 percent of the Anchorage company's revenue.
WorldCom received court approval Tuesday to borrow $2 billion to reorganize in the midst of a huge accounting scandal.
GCI handles long-distance calls from WorldCom customers to Alaska. The money GCI expects to write off comes from telephone traffic prior to the bankruptcy protection filing.
GCI also provides cable television service, Internet access, its own long-distance service, and local phone service in Anchorage, Fairbanks and Juneau.
Despite the hefty financial hit, GCI expects to make a year-end profit, said John Lowber, chief financial officer.
"The pain will be evident in the second and third quarter," he said.
Before the WorldCom accounting scandal broke on June 25, GCI had projected 15 percent growth over three years in EDITDA, a measure of cash flow that stands for earnings before interest, taxes, depreciation and amortization.
The company has since revised the projection down to 10 percent, said David Morris, GCI spokesman.
Shares of GCI were down 54 cents, or 12.3 percent, to close at $3.85 in trading Tuesday on the Nasdaq Stock Market, but gained 10 cents in extended trading.
WorldCom's difficulties have halted GCI's bid to secure $325 million to refinance $180 million in debt and to pursue new opportunities. The Anchorage company was planning to use $50 million to aggressively expand into Lower 48 cable markets.
Those plans are now on hold, Morris said. GCI is still pursuing $250 million in new financing, he said.
The wild card for GCI in the WorldCom collapse is whether customers will stick with the troubled company or take their business elsewhere. Traffic from WorldCom customers accounted for about $60 million of GCI's $357 million in revenue last year.
GCI says its worst-case scenario is a 50 percent erosion in WorldCom calls over the next two to three years, with half of those going to rival AT&T, Morris said.
If customers migrate to Sprint, GCI wouldn't suffer as much. The Anchorage-based company handles calls to Alaska placed by Sprint customers.
The WorldCom debacle has fueled investor jitters worldwide. Analysts expect shares to remain volatile until WorldCom's outlook is more certain.
The Bankruptcy Court case will probably take up to a year and a half to be sorted out, Lowber said.
The other big unknowns for GCI are whether WorldCom will reorganize successfully and whether the company will unload the 5 million shares of GCI stock it owns, Lowber said.