The ghosts of Bernie Ebbers and his deputy Scott Sullivan, still haunt telecoms giant MCI, which perpetrated the world's biggest-ever corporate fraud, writes Jamie Smyth, Technology Reporter

But the firm, which changed its name from WorldCom when it emerged from bankruptcy in April, is doing its best to create a new culture designed to restore faith in MCI, which carries a third of all global internet traffic.

MCI's US and European headquarters have posters emblazoned with its 10 guiding principles dotted around the building and its 90 or so Irish staff have all undergone online ethics training.

To remind them of their responsibilities, staff working at MCI's Irish offices carry key cards with the ethics code imprinted on them. Many of them have been given "ethics badges" reflecting the new code.

"We are very focused on our ethical conduct," says Mr Andy MacLeod, MCI's new managing director for the Europe, Middle East and Africa regions. "Everyone takes ethics training who works at the organisation and we now go far beyond the regulations of the Sarbanes Oxley Act in terms of financial disclosure."

For former WorldCom investors, many of who lost almost their entire investment in the firm when it admitted to improperly accounting for at least $11 billion (€9 billion) in revenue, it is too late. But MCI's 50,000 staff and its creditors will hope its Damascene conversion will help it back to profit.

MCI's ethics code was drawn up by the firm's new chief executive, former Compaq boss Mr Michael Capellas, and is focused on the concept of building trust and credibility with its millions of customers and partners.

It runs from the very top of the company, which has appointed a chief ethical officer, down to every employee.

MCI recently set up an ethical hotline that enables staff to report matters of concern to top executives at the firm.

Mr Capellas has also radically restructured the firm's global management, bringing in new executives such as Mr MacLeod, who previously worked for Cable & Wireless and Nortel Networks.

"About 80 per cent of management in Europe has changed," says Mr MacLeod. "We are a new company in many respects, although a lot of good people who worked in WorldCom are still with MCI ... you can't tar everyone with the same brush."

But is there a danger that all the new emphasis on ethics will prevent MCI from competing aggressively in what is still a really difficult telecoms market?

Not so, says Mr MacLeod, who emphasises that the ethical focus will build more trust among customers who are attracted by MCI's core strength - the world's largest internet protocol (IP) network stretching across five continents and linking 125 countries.

MCI's IP network enables customers to manage their global telephony and internet requirements with a single firm, rather than having to negotiate hundreds of separate contracts. It carries up to a third of all the world's internet traffic and is critical to MCI's future survival prospects, according to Mr Jan Dawson, an analyst with Ovum consultancy.

In a lengthy analysis report published last month, Ovum concludes that MCI's re-emergence from Chapter 11 bankruptcy protection holds the potential to shake-up the telecoms market.

"MCI is now in a better position to engage in aggressive advertising again but it also means that the over-capacity and intense competition in the market is perpetuated," it says.

Indeed, many telecoms analysts are predicting a new round of price reductions as MCI and its US rivals, such as AT&T and Sprint, fight for new customers.

Ovum points out the irony that after perpetrating one of the biggest frauds in history, MCI emerges from Chapter 11 with less debt than its rivals. But on a more negative note it says group revenues are falling by 15 per cent a year and it will require a big effort to make regular profits.

The year long bankruptcy on MCI's European operations had a material impact on the amount of business that customers were willing to sign with the firm. But no global deals were lost during this period, says Mr MacLeod.

Cultural factors and the understanding of a US bankruptcy process also played a role in MCI's success or failure. German and Swiss firms tended to reduce spending while British and Irish firms generally didn't, he added.

Mr Eamon Walsh, MCI Ireland's country manager, says the local operation didn't lose a big client during the bankruptcy mainly because it kept them well informed during the process.

"In the early stages some customers postponed their decision- making on deals but when they saw no derogation of service the confidence came back," he says.

MCI's Irish accounts show turnover slipped in 2002 to €31.2 million, down from €34.8 million in 2001. But there are signs that its business is improving.

This year MCI has signed deals with RTÉ, Aer Lingus, Micros Fidelio and ICT Eurotel in the Republic.

The company has also received more tenders for business since it exited bankruptcy, says Mr Walsh.

New business will be crucial for MCI's Irish operation which reported a €116.8 million loss in 2002 as it became embroiled in its parent's troubles.

It also faces tougher competition in Ireland where new entrants like Smart Telecom are pitching for clients.

A similar uptick in business is being seen in the wider European region, says Mr MacLeod, who for the first time in a long time can focus on launching products as MCI begins investing again.

Last week the firm released a flurry of press releases launching a range of new IP network products designed to attract the attention of corporate customers. And in the second or third quarter MCI plans to launch a new voice-over IP product that could transform pricing, says Mr MacLeod, who hopes this can drive European revenues above €3.2 billion.

Back in Ireland after taking an investment holiday during its restructuring, MCI is investing in partial private circuits, wholesale line rental and digital subscriber line products.

The new products should enable the firm to grab a larger slice of the domestic market, according to Mr Walsh.

But MCI's future will depend to a far greater extent on its US operation, which is under pressure from regulatory rulings outlawing direct sales calls and making it more expensive to use the local networks of its rivals.

The firm was recently forced to shed several thousand staff in the face of the rulings and stiff competition for its traditional long distance US customer base.

Analysts are now speculating that after WorldCom's spate of acquisitions in the 1990s under Bernie Ebbers, MCI will now become a takeover target itself.

Mr MacLeod refuses to rule out this possibility while insisting MCI does have a future on its own despite a glut of telecoms capacity on the world market.

"There is no doubt that there is oversupply in areas of the market but in others, where we operate, there isn't. There is no oversupply in metro rings or access."

And MCI is now forecasting a slight rise in the price of international voice traffic for the first time in years, says Mr MacLeod.

But with many analysts predicting a new wave of consolidation and bankruptcies in telecoms, MCI will have to hope its new ethical approach strikes a chord with potential customers.