WorldCom, plagued by the rapid erosion of its profits and an accounting scandal that created billions in illusory earnings, last night submitted the largest bankruptcy filing in United States history.
The bankruptcy is expected to shake an already wobbling telecommunications industry, but is unlikely to have an immediate impact on customers, including the 20 million users of its MCI long-distance service.
The WorldCom filing listed more than $107 billion in assets, far surpassing those of Enron, which filed for bankruptcy last December. The WorldCom filing had been anticipated since the company disclosed in late June that it had improperly accounted for more than $3.8 billion of expenses.
Few experts or officials expect WorldCom's service to deteriorate noticeably, at least in the near term. ''I want to assure the public that we do not believe this bankruptcy filing will lead to an immediate disruption of service to consumers,'' Michael K. Powell, chairman of the Federal Communciations Commission, said last night.
But industry consultants said they could not imagine how the belt-tightening expected in bankruptcy would improve service that is already, in some respects, sloppy.
WorldCom's collapse has already reverberated through jittery financial markets, and is likely to be felt in the wider economy, with banks, suppliers and other telephone companies devising strategies to contain their exposure.
WorldCom, built through rapid acquisitions, accumulated $41 billion in debts. Founded in 1983 as LDDS Communications, it became the nation's second-largest long-distance company and the largest handler of Internet data.
Company executives said they intended to remain in business, and have been promised new financing from banks to do so. ''We are going to aggressively go forward and restructure our operations,'' John W. Sidgmore, WorldCom's chief executive, said in an interview last night. ''I think ultimately we will emerge as a stronger company.''
While WorldCom has already cut its work force significantly, Mr. Sidgmore said last night that he did not expect further layoffs for the time being. He said he would remain WorldCom's chief but would be joined by a chief restructuring officer brought in by creditors.
Some creditors, however, have questioned whether Mr. Sidgmore, who has served on WorldCom's board for years, should remain in charge. Mr. Sidgmore took over as chief executive in late April after the board ousted Bernard J. Ebbers, one of the company's founders.
Shareholders, who owned what was once one of the world's most valuable companies, worth more than $100 billion at its peak, are expected to be virtually wiped out. With the bankruptcy filing, control passes instead to the banks and bondholders who financed WorldCom's growth.
Besides its own overambitious strategies and flawed accounting, WorldCom also fell victim to a glut of telecommunications capacity.
Cheap and plentiful financing allowed companies rapidly to build transcontinental and transoceanic fiber optic networks in the 1990's. The additional capacity resulted in lower prices for WorldCom's services, which include basic phone service and the transmission of Internet data for large companies.
Mr. Sidgmore said last night that he was opposed to breaking up WorldCom and selling its pieces, aside from an effort already under way to part with peripheral units like businesses in Latin America and some other operations. This approach would rule out selling UUNet, a large Internet backbone operation, or MCI.
But once the company reorganizes, and investors gain a better understanding of its twisted finances, WorldCom could become an attractive acquisition target, analysts say.
WorldCom's crisis deepened last month when it disclosed that Scott D. Sullivan, the chief financial officer, had devised a strategy that improperly accounted for $3.85 billion of expenses. Mr. Sullivan was fired by the board and David F. Myers, the financial controller, resigned.
The Securities and Exchange Commission has charged WorldCom with fraud and the Justice Department has begun a criminal investigation of its business practices.
In an attempt to regain its credibility, WorldCom's board elected two new members to replace Mr. Sullivan and Mr. Ebbers: Nicholas deB. Katzenbach, a private attorney who was attorney general in the Johnson administration; and Dennis R. Beresford, a former head of the Financial Accounting Standards Board and a professor of accounting at the Terry College of Business at the University of Georgia.
The two were also appointed to a special committee to oversee the internal investigation being led by William R. McLucas, the former chief of the enforcement division of the S.E.C.
WorldCom filed for bankruptcy shortly before 9 last night in Federal District Court in Manhattan.
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