updated 5/5/2005 8:04:03 AM ET 2005-05-05T12:04:03

MCI Inc., which recently agreed to be acquired by Verizon Communications Inc. and rejected a higher offer from Qwest Communications International Inc., reported much smaller first-quarter losses on Thursday, due to sharply lower operating costs, and the company backed revenue guidance for 2005.

The nation's second-largest long-distance phone company reported it lost $2 million, or 1 cent per share, for the three months ended March 31 versus a loss of $388 million, or $1.19 per share, in the year-earlier quarter. Losses from continuing operations totaled $91 million, or 28 cents per share, compared with $386 million, or $1.18 per share, in the 2004 period.

Revenue fell 12 percent to $4.79 billion from $5.42 billion last year.

The company said operating expenses fell sharply compared to the year-earlier quarter, when MCI incurred significant costs related to its reorganization. In the first quarter of 2005, access costs, costs of services and products and selling, general and administrative expenses totaled $4.3 billion, down 16 percent compared with $5.2 billion last year.

Looking ahead, MCI said it continues to expect 2005 revenue of $18 billion to $19 billion, in line with analysts' consensus estimate of $18.26 billion.

The company said it expects to generate operating profit before depreciation and amortization of $1.8 billion to $2 billion, excluding merger-related costs. MCI also increased its capital expenditure plan to the range of $1.2 billion to $1.3 billion for 2005, from previous guidance of $1 billion.

Earlier this week, MCI accepted an $8.54 billion buyout offer from Verizon that was 13 percent below the $9.85 billion offered by Qwest. It said it was worried about Qwest's high debt level.

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