From the case time of 1983, MCI's share of the long distance market was projected to experience substantial growth. Similarly, carriers other than MCI and AT&T were expected to experience market share growth. Thus, at the end of 10 years, the long-distance market would resemble an oligopoly more so than a market dominated by one firm. In the instance of the long-distance market, however, AT&T would continued to be expected to have the largest single market share; possibly more so than would typically be associated with an oligopoly, but still within the parameters for an oligopoly.
MCI's external needs for capital may be expected to exceed $3.8 billion over the next several years (from 1983) on a cumulative basis (refer to Exhibit A). On a year-by-year basis, the firm's external needs may be expected to vary from approximately $1.5 billion to no external needs at all (refer to Exhibit A). Such variations will occur as the company continually expands its network with lags between capital spending and increased income that will be derived from such expenditures.
MCI relied on a combination of common stock, convertible preferred stock, debentures both convertible and non-convertible, and retained earnings to satisfy its capital requirements from the firm's inception through 1983. MCI was required to take capital where it could be found, as the firm was attempting to create a market share within an industry that had long been structured as a regulated monopoly. Thus, at times, the company paid a premium cost for capital, which was considered justified to assure that capital would be available when required. The company could have reduced its cost of capital to some extent through a greater use of common stock issues; however, this alternative was rejected, not so much because of a desire not to dilute the monetary value of the equity positions of the original
...