updated 2/23/2004 1:38:35 PM ET 2004-02-23T18:38:35

MCI Inc. and Onvoy Inc., a Minnesota-based phone company, have settled AT&T Corp.'s charges that they passed phone-call routing fees on to AT&T, the companies said Monday.

Terms of the settlement were not provided.

AT&T filed the civil suit in a federal court in Virginia in early September, seeking damages over charges that MCI, formerly known as Worldcom Inc., routed long-distance calls through Canada, in the process shifting to AT&T the expense of paying local phone companies to terminate the calls.

AT&T's suit claimed MCI and Onvoy worked together in the scheme, and alleged fraud and racketeering.

Verizon Communications Inc. and SBC Communications Inc. had also publicly made similar allegations against MCI.

MCI has denied all such claims.

In October, MCI said it stopped using the call-routing technique that was being challenged, and AT&T's lawsuit was delayed by a U.S. bankruptcy judge who said it would interfere with MCI's plans to emerge from bankruptcy protection.

As part of the settlement announced Monday, MCI also dropped contempt-of-court charges against AT&T.

MCI was expected to emerge from Chapter 11 at the end of February but recently asked for a 60-day extension in order to complete its Securities and Exchange Commission filings.

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