By Matthew Barakat
The Associated Press

McLEAN, Va. - WorldCom Inc. walked away from $35 billion in debt and a history tainted by scandal Tuesday, emerging from Chapter 11 bankruptcy and changing its name to MCI, the long-distance phone business it acquired in 1998.

The Ashburn-based company is emerging into a telecommunications industry that is no less competitive than in July 2002, when WorldCom filed for Chapter 11 protection after an accounting scandal revealed up to $11 billion in inflated profits.

Chief executive Michael Capellas said MCI is prepared for the challenges it faces.

"When I took this job 16 months ago, I told our 50,000 employees that we would do all the right things, and we would make history," Capellas said in a conference call Tuesday with reporters. "We don't view this as the finish line, but the time to start a new race."

Capellas said the company emerges with its customer base largely intact, and expects to expand it by providing network security services and taking advantage of its extensive communications infrastructure network.

The bankruptcy process has allowed the company to slash its debt from $41 billion to about $6 billion. That will shave $2.1 billion a year off interest payments for a company producing about $21 billion a year in revenue.

While MCI's reduced debt load may provide it with a competitive advantage, the company still faces major challenges, experts say.

The company's biggest challenge will be to navigate pricing pressures, said Muayyad Al-Chalabi, managing director of telecommunications consulting and research firm RHK.

"The question is, 'Can they reduce their costs enough to match the expected revenue decline?'" Al-Chalabi said Monday.

WorldCom has already warned that it expects revenue to drop 10 percent to 12 percent this year. It has taken steps to reduce costs, especially through job cuts. Last month it announced plans to lay off 4,000 workers.

Another challenge is that, like many companies emerging from bankruptcy, MCI's board will be heavily influenced by bondholders who bought up WorldCom's debt at fire-sale prices.

The bondholders' primary interest is often to ensure that they are repaid for their investment as soon as possible, which might not be conducive to fostering a long-term vision at the company.