UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.  20549

                                    FORM 10-K

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the fiscal year ended December 31, 1997

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

     For the transition period from _____ to _______

                         Commission File Number: 0-6457

                         MCI COMMUNICATIONS CORPORATION

          (Exact name of registrant as specified in its charter)

     Delaware                                  52-0886267
(State of incorporation)            (I.R.S. Employer Identification No.)

     1801 Pennsylvania Avenue, N.W., Washington, D.C.         20006
(Address of principal executive offices)                   (Zip Code)

Registrant's telephone number, including area code:  (202) 872-1600

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:

                       Common Stock, $.10 par value per share
                                (Title of class)

       8.00% Cumulative Quarterly Income Preferred Securities, Series A*
                                (Title of class)
--------------------------
* Issued by MCI Capital I, a Delaware  statutory  business trust. The payment of
trust  distributions  and payments on  liquidation  or redemption are guaranteed
under   certain   circumstances   by   MCI   Communications   Corporation.   MCI
Communications  Corporation is the owner of 100% of the common securities issued
by MCI Capital I.

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months,  and (2) has been subject to such filing  requirements
for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[ ]

The aggregate market value of the voting stock of registrant, which includes the
Common   Stock  and  Class  A  Common   Stock,   held  by   non-affiliates   was
$32,812,112,363  at February 2, 1998, based upon the closing price of the Common
Stock on that date.

As of January 20, 1998, registrant had outstanding  571,230,935 shares of Common
Stock and 135,998,932 shares of Class A Common Stock.

Documents Incorporated by Reference:

Portions of the Annual Report to  Stockholders  for the year ended  December 31,
1997 - Part II.

Portions of the Proxy Statement for the Special  Meeting of  Stockholders  dated
January 22, 1998 - Part III.

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PAGE 2




Forward-looking Statements May Prove Inaccurate


          MCI has made certain forward-looking  statements in this Annual Report
on Form  10-K  that are  subject  to risks  and  uncertainties.  Forward-looking
statements  include  information  concerning  the  possible  future  results  of
operations  of  the  company,  its  long-distance   telecommunication   services
business, its investments in ventures and developing markets ("VDM") businesses,
the  possible  future  results of  operations  of the  company  and those of MCI
WorldCom,  Inc. ("MCI WorldCom")  after the proposed merger with WorldCom,  Inc.
("WorldCom")  and  statements of  information  preceded by,  followed by or that
include the words "believes", "expects",  "anticipates", or similar expressions.
For those statements,  the company claims the protection of the safe- harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of  1995.  The  reader  is  cautioned  that  important  factors  such as the
following,  in addition to those  contained  elsewhere in this Annual  Report on
Form 10-K,  could affect the future  results of the company,  its  long-distance
telecommunication  services and VDM  businesses  and those of MCI WorldCom after
the  proposed  merger with  WorldCom  and could  cause  those  results to differ
materially  from those  expressed in the  forward-looking  statements:  material
adverse changes in the economic  conditions in the markets served by the company
and MCI WorldCom;  a significant  delay in the expected  closing of the proposed
merger with WorldCom;  future regulatory actions and conditions in the company's
and MCI  WorldCom's  operating  areas,  including  the ability of the company to
implement its local strategy and obtain local  facilities at competitive  rates;
the ability to pass on additional charges imposed by the Federal  Communications
Commission  ("FCC");  competition  from others in the United States ("U.S.") and
international  long-distance  markets,  including the entry of the Regional Bell
Operating Companies ("RBOCs") and other companies into the long-distance markets
in the U.S.; the cost of the company's  year 2000  compliance  efforts;  and the
effect of future technological changes on its business.





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                                     PART I

Item 1. Business

GENERAL
-------

     MCI* is one of the world's leading providers of communication  services. It
is the second largest carrier of long-distance telecommunication services in the
U.S.   and  the   second   largest   carrier  of   international   long-distance
telecommunication  services in the world.  On November 9, 1997, MCI entered into
an agreement to merge with WorldCom  which will be  consummated  upon receipt of
the necessary  regulatory  approvals (see "The Merger" below for a more detailed
discussion).

     MCI   provides  a  broad  range  of   communication   services,   including
long-distance   telecommunication   services,   local  and  wireless   services,
data/Internet/intranet  services  and  information  technology  and  outsourcing
services.  The provision of long- distance  telecommunication  services is MCI's
core  business.  Long-  distance  telecommunication  services  comprise  a  wide
spectrum  of  domestic  and  international  voice and data  services,  including
long-distance    telephone   services,    data   communication    services   and
teleconferencing services. During each of the last three years, more than 90% of
MCI's  operating  revenues  and  operating  income  were  derived  from its core
business.

     The communication  services industry  continues to change both domestically
and  internationally,  providing  significant  opportunities  and  risks  to the
participants in these markets. In the U.S., the  Telecommunications  Act of 1996
(the "Telecom  Act") is expected to have a significant  impact on MCI's business
by opening the U.S. local service  markets to competition and allowing the RBOCs
to compete in the long-distance market. However, challenges to the orders issued
by the FCC pursuant to the Telecom Act have delayed the  anticipated  opening of
the local markets to effective competition.  Internationally,  in February 1997,
72 member countries, including the U.S., of the World Trade Organization ("WTO")
entered into an agreement (the "WTO Agreement")

--------
* MCI conducts its business primarily through  subsidiaries.  Unless the context
otherwise requires, "MCI" or "company" means MCI Communications  Corporation,  a
Delaware  corporation  organized  in  August  1968,  and its  subsidiaries  on a
consolidated  basis.  MCI is a  registered  service  mark of MCI  Communications
Corporation.  MCI has  its  principal  executive  offices  at 1801  Pennsylvania
Avenue, N.W., Washington, D.C. 20006 (telephone number (202) 872-1600).

<PAGE>


PAGE 4


to open their  respective  markets,  some of which are monopoly  controlled,  to
foreign competition.

     The changes in the communication  services industry are driven by providers
of  telecommunication  services,  such as MCI, that are  entering,  or trying to
enter, new markets, both domestically and internationally. MCI, as well as other
telecommunication  service providers  previously  offering services primarily in
one segment of the  communication  services  market,  are now  offering,  either
directly or through  alliances  with others,  new services to  complement  their
primary service  offerings.  The offering of these new  complementary  services,
facilitated by evolving technology and by the regulatory  developments described
above, is meant to meet the needs of customers who desire to have most or all of
their  communication  requirements  fulfilled  by one  supplier.  The ability of
companies, such as MCI, to be that single supplier may result in the convergence
of the international, domestic long-distance and local telecommunication service
markets into one global market.

     MCI expects that  competition  from the RBOCs and any others that enter the
long-distance  telecommunication services market, some of which have significant
financial  and other  resources,  will be intense.  Due to the rapidly  changing
nature of these markets,  the advances being made in communications  technology,
the timing of the  consummation  of the  proposed  merger with  WorldCom and the
other  factors  summarized  above,  MCI cannot  predict  the level of its future
success,  but the company  believes that it can and will compete  effectively in
providing its services.

     MCI anticipates that continued  substantial  capital  expenditures  will be
required to compete effectively in the long-distance and local telecommunication
service markets.  MCI continues to expand its digital transmission and switching
facilities  and  capabilities  to meet the  requirements  of its  customers  for
additional and enhanced domestic and international  services,  to add redundancy
to its network and to enhance network intelligence, which enables MCI to utilize
its transmission resources more effectively and provide enhanced services. Total
capital  expenditures  for these expansions were  approximately  $3.8 billion in
1997,  $3.3 billion in 1996 and $2.9 billion in 1995. MCI  anticipates  that its
core  business and its  ventures  and  developing  markets  business  units will
require total capital expenditures of approximately $3.3 billion in 1998.

     In 1997,  the company  developed  and began to implement its plan to become
Year 2000  compliant by the year 2000. The plan includes (i) an inventory of the
company's  internal  systems and  applications  for year 2000  compliance,  (ii)
solicitation of its outside vendors,  suppliers and major customers,  including,
but not limited to, each of the RBOCs,  major  communications  equipment vendors
and foreign PTTs, to determine the level of and plans for their year 2000

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PAGE 5


compliance,  (iii) development of necessary conversion programs,  (iv) replacing
or  upgrading  non-compliant  equipment,  (v)  conversion  of systems,  and (vi)
testing.

     The company  expects to incur  approximately  $400 million of expenses over
the next two years to implement  its Year 2000 plan.  The company  expects to be
Year 2000 compliant on or before December 31, 1999.

     As of December 31, 1997, MCI had approximately 60,000 full-time employees.

      The Merger
      ----------

     On November 9, 1997, MCI entered into an agreement (the "Merger Agreement")
to merge  with  WorldCom  to  create a fully  integrated  global  communications
company.  The  combined  company  will be named MCI  WorldCom and will provide a
complete   range  of   local,   long-   distance,   data/Internet/intranet   and
international communications services.

     On March 11,  1998,  the  stockholders  of MCI and  WorldCom  approved  the
Merger.  Consummation  of the  Merger is also  subject  to  certain  conditions,
including  the  receipt  of  required  regulatory  approvals.  See  MCI's  Proxy
Statement for its 1998 Special Meeting for a full  description of the Merger and
the risks and benefits of the Merger,  which description is incorporated  herein
by reference.

     Concurrent  with the Merger  Agreement,  the Company,  WorldCom and British
Telecommunications  plc  ("BT")  entered  into an  agreement  (the  "Termination
Agreement")  whereby (i) the Agreement and Plan of Merger,  dated as of November
3, 1996,  as amended  (the "BT Merger  Agreement"),  among the  Company,  BT and
Tadworth Corporation was terminated; (ii) WorldCom agreed to pay BT $450,000,000
and  expenses  not in  excess  of  $15,000,000  in  connection  with the plan of
reorganization  in order to induce BT to waive its  rights  under,  and agree to
terminate,  the BT Merger  Agreement;  (iii) BT agreed to  support  and vote its
shares  of Class A Common  Stock in favor of the  Merger;  and (iv) BT agreed to
exercise  its call  option to acquire  MCI's  shares in  Concert  Communications
Company immediately following the effective time of the Merger.

     MCI believes MCI WorldCom, with the combined resources of MCI and WorldCom,
will be able to expand into new  markets,  offer new  services  and compete more
effectively  in the  local  services  market  faster  than MCI  would  have on a
standalone   basis.  See  "CORE  BUSINESS  -  COMPETITION"  and  "CORE  BUSINESS
REGULATION"  below  for  a  further  discussion  of  the  Telecom  Act  and  its
anticipated impact on competition and MCI.


<PAGE>


PAGE 6


CORE BUSINESS
-------------

      Services
      --------
     MCI  provides a wide  range of  long-distance  telecommunication  services,
including:  basic long-distance telephone service; dial around; collect calling,
operator assistance and calling card services (including prepaid calling cards);
toll free or 800 services;  and 900 services.  MCI also provides a wide range of
basic and enhanced  voice and data  services,  including  private line services;
voice and data services provided over software-defined virtual private networks;
switched and dedicated  Internet access services and Internet backbone services.
The company  offers these services  individually  and in  combinations.  Through
combined offerings, MCI provides customers with benefits such as single billing,
unified services for multi-location companies and customized calling plans.

     MCI markets  domestic and  international  long-distance  telecommunication,
domestic data  telecommunication  and electronic messaging services to business,
government and residential customers primarily through the sales organization of
its  long-  distance   telecommunication   subsidiary,   MCI  Telecommunications
Corporation  ("MCIT").   International  data  telecommunication  and  electronic
messaging services are marketed through MCI International,  Inc., a wholly-owned
subsidiary  of MCI.  To a lesser  extent,  MCI also  markets  its voice and data
communication  services  domestically and internationally  through  arrangements
with third parties.


      System
      ------
     Domestic  long-distance  services  are  provided  primarily  over MCI's own
optical fiber and terrestrial digital microwave  communication systems and, to a
lesser extent,  over transmission  facilities leased from other common carriers,
utilizing  MCI's  digital  switches.  International  communication  services are
provided by submarine  cable  systems in which MCI holds  investment  positions,
satellites and facilities of other domestic and foreign carriers.







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      Local Access
      ------------

     MCI  provides  customers  that  utilize  large  volumes  of long-  distance
telecommunication  services  with direct access to its long-  distance  network.
Most customers  access MCI's services through local  interconnection  facilities
provided by the incumbent  local  exchange  carriers  ("ILECs"),  the largest of
which are  subsidiaries of the RBOCs,  and competitive  local exchange  carriers
("CLECs").  To a much lesser extent,  local access is provided by MCI. The costs
of these local  interconnection  facilities are a significant component of MCI's
operating  expenses.  See  "REGULATION"  below for a discussion of the impact on
local  access  costs  MCI  anticipates  from the  Telecom  Act and the FCC rules
relating thereto.


      Competition
      -----------

     MCI's   primary  and  most   vigorous   competitor   in  the  domestic  and
international  long-distance  telecommunication  services market continues to be
AT&T  Corp.  ("AT&T"),   which  has  substantial  capital  and  other  financial
resources.  Other  competitors  include  Sprint  Corporation  ("Sprint"),  other
facilities-based   domestic   telecommunication  common  carriers  and  numerous
resellers of long- distance  telecommunication  services. MCI also competes with
RBOCs,  which  provide  toll  telecommunication  services  within  local  access
transport  areas  ("LATA"),  and with ILECs that provide toll  telecommunication
services.

     MCI believes that the RBOCs will eventually become substantial  competitors
of MCI for interLATA  long-distance  telecommunication  services,  especially in
their local service regions when allowed to offer such services  pursuant to the
Telecom Act.  (See  "REGULATION  - Telecom Act" below.) This is due to the RBOCs
ownership  of  extensive  facilities  in  their  local  service  regions,  their
long-standing  customer  relationships  and very  substantial  capital and other
financial  resources.  MCI expects to compete effectively against the RBOCs as a
result of MCI's  innovation in, and quality of,  services,  the diversity of its
services, its ability to offer a combination of services, its marketing strategy
and customer  service.  However,  MCI expects that the RBOCs' ability to provide
interLATA long-distance  telecommunications services in their local regions will
result in certain additional pricing and margin pressures.

     The telecommunications  industry is also in a period of rapid technological
evolution,  marked by the introduction of new product and service  offerings and
increasing satellite and fiber optic transmission  capacity for services similar
to those provided by

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PAGE 8


MCI. MCI may be subject to additional competition as a result of the development
of new  technologies  and increased  availability of domestic and  international
transmission  capacity.  Even though fiber optic networks,  such as that of MCI,
are now widely used for  long-distance  transmission,  it is  possible  that the
competitiveness  of such  networks  could  be  adversely  affected  by  changing
technology.

     MCI cannot  predict  which of many  possible  future  product  and  service
offerings  will be  important  to  maintain  its  competitive  position  or what
expenditures  will be required to develop and provide such products and services
or the  impact  these  expenditures  and the  pricing  pressures  expected  from
competing  with the RBOCs will have on its  consolidated  financial  position or
results of operations.


REGULATION
----------


      General
      -------

     MCI  is  subject  to  varying   degrees  of  federal,   state,   local  and
international  regulation. In the United States, the FCC has extensive authority
to  regulate  interstate  services  and local  access  facilities  and  services
provided by common carriers,  including the power to review the interstate rates
charged by carriers  and to establish  policies  that  promote  competition  for
interstate telecommunication services. However, MCI is not currently required to
obtain FCC authorization for installation or operation of its network facilities
used for  domestic  services,  other  than  licenses  for  specific  terrestrial
microwave and satellite earth station  facilities  which utilize radio frequency
spectrum. FCC approval is required,  however, for the installation and operation
of international facilities and services.

     At the state level, MCI must be separately certified in each state to offer
local  exchange  and  intrastate  long-distance  services.  No  state,  however,
subjects MCI to price cap or rate of return  regulation.  MCI is also subject to
varying degrees of regulation in the foreign  jurisdictions in which it conducts
business,  including authorization for the installation and operation of network
facilities.







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      Telecom Act
      -----------

     The Telecom Act, among other things,  permits the RBOCs to provide domestic
and  international  long-distance  services to customers  located outside of the
RBOCs'  home  regions.   It  also  permits  an  RBOC  to  provide  domestic  and
international long-distance service originating within states in its region upon
a finding by the FCC that the RBOC has satisfied certain criteria for opening up
its  local  exchange   network  to   competition   and  that  its  provision  of
long-distance  services would further the public interest;  and removes existing
barriers  to entry into local  service  markets.  Additionally,  the Telecom Act
changes the manner in which certain interconnection agreements between ILECs and
carriers are negotiated,  arbitrated and approved; provides procedures to revise
universal service standards; and imposes penalties for unauthorized switching of
customers.

     In  implementing  the  Telecom  Act,  the FCC issued an order  establishing
nationwide  rules designed to encourage new entrants to participate in the local
services  markets through  interconnection  with ILECs,  resale of ILECs' retail
services,  and use of individual and combinations of unbundled network elements.
These rules set the groundwork for the statutory  criteria  governing RBOC entry
into the long-distance  telecommunications market. The FCC order was appealed to
the  Eighth  Circuit,  which,  among  other  things,  vacated  all of the  FCC's
nationwide  pricing  rules  and the FCC's  requirement  that  unbundled  network
elements be provided on a combined  basis.  The United States  Supreme Court has
granted certiorari to review the decision.

     Pursuant to the Telecom Act, the FCC has denied four applications  filed by
three  of  the  RBOCs   seeking   authority  to  provide   in-region   interLATA
long-distance   telecommunication  service.  Three  of  the  denials  have  been
appealed.  Certain  RBOCs have also  raised a  constitutional  challenge  to the
provision  of the Telecom Act that  grants the FCC the  authority  to deny these
applications   and  restricts  RBOC   provision  of  interLATA   long-  distance
telecommunication  services in their local  regions.  On December 31, 1997,  the
United States District Court for the Northern  District of Texas ruled that this
restriction violates the Bill of Attainder Clause of the U.S. Constitution.  The
District Court subsequently stayed its decision pending appeal.

     The Telecom Act also provided for the FCC to review and  implement  reforms
to the Universal Service subsidies which, among other things, allow consumers in
rural or other  high cost  areas  access to  telecommunication  and  information
services at rates comparable to those charged in urban areas. The access charges
that MCI pays to ILECs have been set at levels intended to provide

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Universal Service  subsidies;  such access charges are a principal  component of
MCI's telecommunication  expense. On May 7, 1997, the FCC announced that it will
issue a series of orders that will reform Universal Service subsidy  allocations
and adopted various reforms to the existing rate structure for interstate access
services provided by the ILECs that are designed to reduce access charges,  over
time, to more economically  efficient levels and rate structures.  These actions
have been  appealed  by the ILECs to federal  courts of  appeals.  In  addition,
several state agencies have started  proceedings to address the  reallocation of
implicit  subsidies  contained in the access rates and retail  service  rates to
state Universal Service funds.

      International
      -------------

     MCI  offers  its  international  public  switched  voice  services  through
arrangements with foreign public utility authorities and is compensated based on
traditional settlement rates and proportionate return regimes. In December 1996,
the FCC  adopted  a new  policy  that  makes it  easier  for U.S.  international
carriers  to obtain  authority  to route  international  public  switched  voice
traffic to and from the United States outside of the traditional settlement rate
and  proportionate  return regimes.  In February 1997, the United States entered
into the WTO Agreement that contemplates  liberalizing the provision of switched
voice  telephone  and other  telecommunication  services  in  scores of  foreign
countries over the next several years. In November 1997, in order to comply with
U.S. commitments to the WTO Agreement,  the FCC adopted new rules,  effective as
of  February  9, 1998,  that  liberalize  existing  policies  regarding  (i) the
services that may be provided in the U.S. by certain  carriers  affiliated  with
foreign  carriers and the rates to be charged for  international  switched voice
services;  and (ii) the  provision  of  international  switched  voice  services
outside of the traditional settlement rate and proportionate return regimes.

     In August 1997, the FCC adopted lower mandatory  settlement rate benchmarks
to attempt  to reduce  the rates that U.S.  carriers  pay  foreign  carriers  to
terminate  traffic  in  their  home  countries.  The FCC also  adopted  rules to
encourage  foreign  carriers and WTO member  countries to reduce the  settlement
rates below the benchmarks.

     MCI cannot  predict the ultimate  outcome of the  challenges  to the orders
issued by the FCC pursuant to the Telecom  Act.  Nor can it predict  whether the
resolution of these  challenges,  the  implementation  of the Telecom Act or any
further  legislation,  regulation or  regulatory  changes,  whether  domestic or
international,  will  have  a  material  impact  on its  consolidated  financial
position  or results  of  operations  or will  facilitate  MCI's  entry into new
markets.

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VENTURES AND DEVELOPING MARKETS BUSINESS
----------------------------------------

     MCI  has   diversified  the   communication   services  it  offers  through
investments in ventures and developing markets businesses.  This diversification
enables MCI to meet more of the  communications  needs of its  customers  and to
take advantage of developing opportunities in the communication services market.
See Item 6.  Management's  Discussion  and Analysis and "VENTURES AND DEVELOPING
MARKETS  BUSINESS" below for information of the financial  operations of the VDM
business.

      Local Services
      --------------

     Through either its own local city networks or through arrangements with the
ILECs and CLECs for special access and switched  access  services,  MCI provides
businesses  and  governments  with  high  quality  dedicated  access  to the MCI
network. As of December 31, 1997, MCI had been granted authority to offer a full
range of local switched  services in 42 states and had applications  pending for
such services in 7 other states.  MCI has 80 operational local city networks and
provides  facilities-based switched local services in 31 markets. MCI intends to
offer such local  services  in over 100 U.S.  markets  after  completion  of the
Merger. To a limited extent,  MCI resells local services to customers in several
states in the U.S.

     Although  the Telecom Act  requires  ILECs to provide  interconnection  and
access to its local  networks and to provide for resale of its local services on
reasonable and  nondiscriminatory  terms,  MCI does not know if this requirement
will be met.  This  uncertainty  is  increased  due to the rulings of the Eighth
Circuit  on  actions  taken  by the  FCC  to  implement  the  Telecom  Act.  See
"REGULATION - Telecom Act" above.  The pace at which local services will be made
available  for resale and at which network  elements  will be made  available on
reasonable  and  nondiscriminatory  terms,  the prices at which MCI can purchase
such services from the ILEC and the amount of capital available to MCI to expand
its local  facilities  will affect the types of local services MCI can offer and
its  ability to compete  with the ILECs in  providing  local  telecommunications
services.  MCI  announced  in 1998  that  the  resale  of ILEC  services  is not
profitable and that it will focus on providing  facilities  based local services
to its customers.

     The ILECs have very substantial capital and other resources,  long standing
customer   relationships   and  extensive   existing   facilities   and  network
rights-of-way and are MCI's primary

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PAGE 12


competitors in the local services market. In addition,  it is anticipated that a
number of long-distance telecommunication,  wireless and cable service providers
and others will enter the local services market in competition with MCI. Some of
these potential competitors have substantial financial and other resources.  MCI
will also compete in the local  services  market with a number of other CLECs, a
few of which have existing local networks and significant financial resources.

     To the extent MCI and others provide  intrastate  local services,  they are
also subject to regulation by state regulatory commissions, which have extensive
authority to regulate the provision of local  services.  MCI is required to file
tariffs as a competitive local exchange carrier.  Those filing  requirements may
be less restrictive than those imposed on the ILECs.


      Wireless Services
      -----------------

     Through the acquisition in September 1995 of Nationwide  Cellular  Service,
Inc.  ("Nationwide"),  a reseller of cellular  phone  services and a retailer of
cellular phone equipment, and, as a result of the execution of resale agreements
with  facilities-based   cellular  telephone  service  providers,  MCI  has  the
capability to offer cellular  telephone  services obtained from facilities based
providers to a substantial portion of the U.S. population.

     MCI markets  these  services to both  business  and  residential  customers
through the former  Nationwide's  sales organization and stores and MCIT's sales
organization.  In 1997, the company  focused on providing  wireless  services as
part  of a total  communications  services  package  rather  than as  standalone
offerings.

     MCI's  primary  competitors  in  the  wireless  market  are  AT&T  Wireless
Services, Airtouch Communications,  Inc., Ameritech, Bell Atlantic NYNEX Mobile,
GTE,  SBC and Sprint,  all of which  provide  wireless  services  over their own
facilities.  As MCI is not a facilities based wireless operator,  its ability to
be  competitive  depends  on the terms and  conditions  under  which it  obtains
services and its ability to renew on satisfactory  terms its resale  agreements.
Competition  is expected to  intensify  as the winning  bidders in the  Personal
Communication System spectrum auctions offer competing services.

     As a wireless  reseller,  MCI is not subject to any  tariffing or licensing
requirements by the FCC or state regulatory agencies.




<PAGE>


PAGE 13


      Information Technology Services
      -------------------------------

     MCI's  information   technology   ("IT")  services   primarily  consist  of
outsourcing,  IT consulting,  systems  integration,  private network management,
technology  deployment and  applications  and systems  development.  IT services
generally  involve the use of technology,  know-how and methodologies to gather,
collate,  analyze,  record,   characterize,   categorize,   process,   generate,
distribute and/or store  information for end-users.  In addition to IT services,
MCI offers call center  services,  which include  technical  help desk services,
customer services,  telesales,  call center consulting and implementation,  call
center  network  integration   services,   and   software/database   application
development.

     MCI offers IT services to commercial and government enterprises through SHL
Systemhouse Co., acquired by MCI in November 1995. MCI's IT services include the
design,  development  and  implementation  of IT  systems  with an  emphasis  on
client/server technologies; the management,  operation and maintenance of client
IT  functions  as  part  of  outsourcing  arrangements;  and  the  delivery  and
installation of IT hardware and software.

     MCI serves its IT clients by (i)  working  with a client to analyze  its IT
needs and, based on this analysis,  designing,  developing and  implementing  an
integrated  client/server  IT system;  (ii)  providing  systems  operations  and
management  services  for  a  broad  range  of  computing  platforms,  including
mainframe, mid-range computers, personal computer and network environments, such
as local-area  networks and wide-area  networks;  and (iii) assessing a client's
computing  platform and network  requirements and then configuring,  delivering,
installing  and testing the needed  hardware and software  products to meet such
requirements. MCI also offers service for IT products and training and education
of client IT users.

     Competitors  in the  IT  business  include  Andersen  Consulting,  Computer
Sciences  Corporation,  Electronic Data Systems  Corporation  and  International
Business Machines Corporation, all of which have substantial financial and other
resources.  MCI derives a material amount of its IT revenues from a small number
of customers. In addition, MCI faces competition in the IT industry not only for
contracts, but also for personnel.  There is a shortage of skilled employees and
a high turnover rate among skilled employees in the client/server portion of the
IT business.







<PAGE>


PAGE 14


      International Services
      ----------------------

     MCI  continues to develop  global  alliances to expand the use and reach of
its services and to meet the global needs of its customers.

     On March 9, 1998, MCI entered into a strategic  alliance with Telefonica de
Espana  ("Telefonica")  and WorldCom to create strategic business ventures which
will enter the telecommunication  markets in Europe and the Americas. As part of
the  alliance,   MCI  and  Telefonica's   international  unit,  T.I.  Telefonica
Internacional de Espana S.A., amended their Pan-American Joint Venture Agreement
entered into last year.  The joint venture was formed to target the fast growing
Latin American  communications  market, and to establish a state-of-the-art  Pan
American network to provide  customers a portfolio of integrated  communications
services.

     AVANTEL  S.A.  de C.V.  ("AVANTEL")  is a business  venture  between  Grupo
Financiero Banamex-Accival,  Mexico's largest financial group, and MCI, in which
MCI owns a 44.5% equity  interest.  AVANTEL  built  Mexico's  first  all-digital
fiber-optic  network.  In 1996,  AVANTEL  became  the first  company  to provide
alternative  long-distance  telecommunication  service in Mexico in  competition
with   Telefonos   de   Mexico   ("TelMex").   TelMex,   the   former   monopoly
telecommunications provider, is AVANTEL's primary competitor. TelMex's financial
and other  resources are  substantially  greater than  AVANTEL's,  and it has an
extensive existing customer base.

     Concert Communications  Company ("Concert"),  is a business venture between
MCI and BT in which MCI owns a 24.9% equity interest. Concert*** provides global
enhanced  and  value-added  telecommunication  services,  such as  packet  data,
virtual  network,  frame  relay  and  managed  bandwidth  services.  MCI  is the
exclusive  distributor of Concert services in North,  Central and South America,
and BT is the  exclusive  distributor  of  Concert  services  in the rest of the
world.

     Pursuant to the Termination  Agreement,  BT has agreed to exercise its call
option to acquire  MCI's shares in Concert  immediately  following the effective
time of the Merger at a value to be mutually  agreed to by MCI and BT or, absent
such  agreement,  by an  independent  investment  bank.  Upon  purchase of MCI's
interest  in Concert by BT, MCI will no longer be an  exclusive  distributor  of
Concert  services  and will no longer be bound by the  territorial  restrictions
affecting international enhanced services. However,
--------
***  Concert is a mark of Concert  Communications  Company,  a business  venture
between MCI and BT, and is used under license.


<PAGE>


PAGE 15


MCI will be able to continue  to provide  Concert  services on a non-  exclusive
basis to customers in the U.S. for a period of at least two years and as many as
five years.

     AT&T and Sprint have each formed global alliances that compete with Concert
and will  compete  with the  international  enhanced  service  offerings  of MCI
WorldCom.  AT&T's  WorldPartners is an association of member companies formed in
1993 to provide a family of  telecommunication  services  (private  line,  frame
relay and virtual network services) to multinational  customers.  Members of the
association include AT&T, KDD of Japan, Singapore Telecom, Telstra of Australia,
Telecom New Zealand, Hong Kong Telecom,  Unitel of Canada, Korea Telecom and the
members of  Unisource  (which  include  Royal PTT  Netherlands  NV, Telia AB and
Schweizerische  PTT -  Betriebe).  Sprint,  France  Telecom  ("FT") and Deutsche
Telekom  ("DT") have formed  Global One, a global  partnership  which  offers an
array of  international  telecommunication  services to  multinational  business
customers.  As part of the transaction,  FT and DT each acquired 10% of Sprint's
common stock.

     In 1992, MCI entered into a strategic alliance with Stentor, an alliance of
major Canadian telephone  companies,  to develop a fully integrated  intelligent
network linking the U.S. and Canada. In 1995,  Stentor entered into an agreement
with MCI to become the exclusive  distributor of Concert services in Canada. The
Stentor  alliance and the AVANTEL joint venture will  facilitate the development
of a fully  integrated,  seamless  North American  network  capable of providing
services with identical  features to customers  throughout the U.S.,  Canada and
Mexico.

     In  addition,  MCI owns  minority  equity  interests  in  telecommunication
service  providers  in  Portugal,  New  Zealand  and  Belize  and  is  exploring
opportunities in Central and South America and other areas of the world.


      Multimedia Services
      -------------------

     In 1995  and  1996,  MCI  invested  a total of  $1.35  billion  in The News
Corporation  Limited ("News Corp").  In May 1997, MCI and News Corp entered into
an agreement to form a Direct Broadcast Satellite ("DBS") joint venture in which
MCI would hold a 19.9%  interest  with the stated  intention  of seeking a third
party to acquire their combined interest.

     DBS service is a  point-to-multipoint  service  that uses high-  powered KU
band  satellites  which are placed in a  geosynchronous  orbit.  DBS  service is
capable of delivering a wide range of services, such as subscription television,
pay-per-view services,

<PAGE>


PAGE 16


such as movies,  concerts and sporting events,  and digitized  content,  such as
magazines.

     The DBS  license,  awarded  by the FCC to MCI in  December  1996 for $682.5
million,  granted MCI the right to use 28 of 32 channels in the  satellite  slot
located at 110 degrees  west  longitude,  which  provides  coverage to all fifty
states in the U.S. and Puerto Rico.

     In June 1997,  MCI and News Corp entered into an agreement  with  Primestar
Partners,  L.P.  ("Primestar") for the sale of substantially all of their assets
related to the DBS business,  including the DBS license but excluding two of the
four  satellites  under  construction.  This  transaction  is part  of a  larger
transaction  that  involves the  consolidation  of Primestar  and TCI  Satellite
Entertainment,  Inc.  into a newly formed entity ("New  Primestar").  Concurrent
with the closing of the Primestar transaction, MCI will acquire preferred shares
in a subsidiary  of News Corp for a face amount equal to MCI's cost of obtaining
the FCC license plus  interest  thereon.  MCI will also  receive from  Primestar
consideration in the form of cash and interest bearing  non-voting New Primestar
securities for its 19.9% interest in the DBS joint venture.  The  transaction is
subject to regulatory approvals, including approval by the FCC of MCI's transfer
of the DBS license to New Primestar and approval by the Department of Justice.

     Competition  in the DBS  service  market  will arise  from  three  sources:
existing  and future DBS  service  providers,  including,  two RBOCs  which have
formed an alliance with a DBS service  provider;  medium-power  satellite  video
service providers; and cable companies that operate land based facilities. These
competitors have substantial  financial  resources,  existing customer bases and
experienced  marketing  organizations.  In  addition,  it  is  anticipated  that
long-distance  telecommunication  service  providers and other RBOCs may seek to
form  alliances  with DBS  service or other  multimedia  service  providers  and
compete in this market using terrestrial or satellite-based  technologies,  such
as KA band satellite,  digital broadcast spectrum and Local Multipoint  Delivery
Service.





<PAGE>


PAGE 17


Item 2.  Properties.
-------------------

     MCI leases, under long-term leases, portions of railroad, utility and other
rights-of-way for the fiber-optic  transmission system used in its long-distance
network.  MCI also has numerous tower sites,  generally in rural areas, to serve
as repeater  stations in its domestic  microwave  transmission  system.  Most of
these  sites are  leased,  although  MCI does own many of those  which are at an
intersection of two or more routes of MCI's transmission system.  Generally, MCI
owns the buildings that serve as switch facilities for the transmission  system.
In metropolitan  areas, MCI leases facilities to serve as operations  facilities
for its transmission systems.

     MCI's local services network consists of a fiber optic transmission network
consisting  of lighted  (currently  used) and dark (not  currently  used) fibers
which are  either  owned or leased  under  long-term  leases.  These  fibers are
located in conduits,  which are either owned or leased under  long-term  leases.
MCI supplements  its local services  network with  transmission  capacity leased
from other carriers under  long-term  leases.  MCI also leases,  under long-term
leases,  the  buildings  that house its Class 5 switches  and other  network and
administrative office space.

     In addition,  MCI leases, under long-term leases,  office space to serve as
sales office and/or  administrative  facilities.  Some of these  facilities  are
located  jointly  with  operations   facilities.   In  addition,  MCI  owns  its
headquarters  building in  Washington,  D.C.  and two  buildings  in a suburb of
Washington,  D.C., as well as administrative facilities in Cary, North Carolina;
Cedar Rapids,  Iowa;  Colorado Springs,  Colorado;  Piscataway,  New Jersey; and
Richardson, Texas.


Item 3.  Legal Proceedings.
---------------------------

     Information  regarding  contingencies  and legal proceedings is included in
Note 14 of the  Notes to  Consolidated  Financial  Statements  in the  company's
Annual Report to  Stockholders  for the year ended  December 31, 1997,  which is
incorporated  herein by  reference  to Exhibit 13 to this Annual  Report on Form
10-K.


Item 4.  Submission of Matters to a Vote of Security Holders.
-------------------------------------------------------------

      None.


<PAGE>


PAGE 18


                          PART II

Item 5.  Market for Registrant's Common Equity and Related
----------------------------------------------------------
Stockholder Matters.
-------------------

      MCI Common Stock is traded on the NASDAQ National Market. The tables below
set forth the high and low bid prices of the Common  Stock as  reported  for the
periods indicated.

                                                     1997

                                               HIGH      LOW
                                            --------   ---------

                    4th Quarter              $45.00    $33.13
                    3rd Quarter               43.38     27.31
                    2nd Quarter               41.88     35.63
                    1st Quarter               38.75     32.38



                                                    1996

                                              HIGH        LOW
                                            --------   ---------

                    4th Quarter              $33.88    $23.88
                    3rd Quarter               28.13     22.38
                    2nd Quarter               30.38     24.88
                    1st Quarter               31.13     25.63



      MCI paid cash  dividends  of $.025  per share of Common  Stock in July and
December of 1997 and 1996 and an equivalent cash dividend on the shares of Class
A Common Stock.

      At January 20, 1998,  there were 44,754  holders of record of MCI's Common
Stock and 1 holder of record of MCI's Class A Common Stock.




<PAGE>


PAGE 19


Recent Sales of Unregistered Securities
---------------------------------------

On June 30, 1995,  as part of the merger  consideration  under the Agreement and
Plan of Merger among Darome  Teleconferencing,  Inc.,  MCI and MCIT,  MCI issued
793,297 shares of MCI Common Stock, par value $.10 per share,  with an aggregate
value of  approximately  $16,000,000 or  approximately  $20.17 per share, to the
shareholders  of  Darome  Teleconferencing,   Inc.  MCI  claims  exemption  from
registration  of the shares under Section 4(2) of the Securities Act of 1933, as
amended.

Items 6 through 8.
-----------------

     The information required by these items is included in the company's Annual
Report to Stockholders for the year ended December 31, 1997,  which  information
is filed as Exhibit 13 to this  Annual  Report on Form 10-K and is  incorporated
herein by reference.

Item 9.  Change in and Disagreements with Accountants on
--------------------------------------------------------
 Accounting and Financial Disclosure.
------------------------------------

       None.





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<PAGE>


PAGE 20



                                    PART III


Item 10.  Directors and Executive Officers.
------------------------------------------

      Executive Officers of the Registrant.*
      ------------------------------------

      The executive  officers of MCI,  including its  subsidiaries,  are elected
annually and serve at the pleasure of the  respective  board of directors.  They
are:


       Name            Age*         Position**

Bert C. Roberts, Jr.   55        Chairman of the Board,
                                  Director

Gerald H. Taylor       56        Chief Executive Officer, Director

Timothy F. Price       44        President and
                                  Chief Operating Officer

Seth D. Blumenfeld     57        President,
                                 MCI International, Inc.

John W. Gerdelman      45        Executive Vice President,
                                 MCI Telecommunications Corporation

Douglas L. Maine       49        Executive Vice President and
                                  Chief Financial Officer

Scott B. Ross          46        Director, SHL Systemhouse Co.,
                                 Director, President and Chief
                                 Operating Officer, MCI Systemhouse
                                 Corp.

Michael J. Rowny       47        Executive Vice President

Michael H. Salsbury    48        Executive Vice President and
                                  General Counsel

David M. Case          42        Vice President and Controller

--------------------
 *  As of March 1, 1998.
**  Unless otherwise indicated, the position is with MCI
    Communications Corporation.


<PAGE>


PAGE 21




     Mr.  Roberts has been  Chairman of the Board of MCI since June 1992. He was
Chief  Executive  Officer of MCI from  December  1991 to November  1996.  He was
President and Chief Operating  Officer of MCI from October 1985 to June 1992 and
President of MCI  Telecommunications  Corporation ("MCIT") from May 1983 to June
1992.  Mr.  Roberts  has been a  director  of MCI since  1985;  a  non-executive
director of Telefonica de Espana, a telecommunications company located in Spain,
since March 1998; a non-executive  director of The News Corporation  Limited,  a
global multi-media company located in Australia,  since November 1995; and was a
non-  executive  director of British  Telecommunications  plc  ("BT"),  a global
telecommunications provider which has an approximate 20% equity interest in MCI,
from October 1994 to March 1998.

     Mr. Taylor has been Chief Executive  Officer of MCI since November 1996. He
has been Vice  Chairman  of MCIT  since July 1995.  He was  President  and Chief
Operating Officer of MCI from July 1994 to November 1996 and President and Chief
Operating Officer of MCIT from April 1994 to July 1995. He was an Executive Vice
President and Group  Executive of MCIT from September 1993 to April 1994. He was
an Executive Vice  President of MCIT,  serving as President,  Consumer  Markets,
from  November  1990 to September  1993.  Mr.  Taylor has been a director of MCI
since September 1994 and was a non- executive  director of BT from November 1996
to November 1997.

     Mr.  Price has been  President  and Chief  Operating  Officer  of MCI since
November 1996. He has been President and Chief  Operating  Officer of MCIT since
July 1995.  He was an  Executive  Vice  President  and Group  President of MCIT,
serving as Group President,  Communication  Services, from December 1994 to July
1995. He was an Executive Vice President of MCIT, serving as President, Business
Markets, from June 1993 to December 1994. He was a Senior Vice President of MCIT
from November 1990 to June 1993, serving as President,  Business Services,  from
July 1992 to June 1993 and as Senior  Vice  President,  Consumer  Markets,  from
November 1990 to July 1992.

     Mr. Blumenfeld was President of MCI  International,  Inc., from August 1983
to July 1993. He was Executive Vice  President and Group  Executive of MCIT from
July 1993 to September 1994 and has been President of MCI International, Inc.
since September 1994.



<PAGE>


PAGE 22



     Mr.  Gerdelman  has been an Executive  Vice  President of MCIT,  serving as
President,  networkMCI  Services,  since  October  1994.  He was a  Senior  Vice
President  of MCIT from  August 1992 to October  1994.  From July 1991 to August
1992, he was President and Chief  Executive  Officer of MCI Services  Marketing,
Inc.,  a company  that  provided  telemarketing  services to, and in which a 51%
equity  interest was held by, MCIT.  Since July 1994,  Mr.  Gerdelman has been a
director of General Communication,  Inc. ("GCI"), a telecommunications  provider
in Alaska,  of which MCIT owns  approximately  22% of the outstanding  shares of
Class A Common Stock and approximately 31% of the outstanding  shares of Class B
Common Stock.

     Mr. Maine has been an Executive Vice President of MCI since April 1994. Mr.
Maine has been Chief  Financial  Officer of MCI since  February  1992.  He was a
Senior Vice President of MCI from  September  1988 to April 1994.  From November
1990 to  February  1992,  he was a Senior  Vice  President  of MCIT,  serving as
President of the Southern Division.

     Mr. Ross has been President and Chief Operating  Officer of MCI Systemhouse
Corp. since September 1995. He was an Executive Vice President of MCIT,  serving
as President,  Finance and Business  Operations,  from August 1995 to March 1996
and as President,  Business Markets, from December 1994 to August 1995. He was a
Senior Vice  President of MCIT from  September  1993 to December 1994 and a Vice
President of MCIT for more that 5 years prior thereto.

     Mr. Rowny has been an Executive  Vice President of MCI since April 1995 and
an Executive Vice  President of MCIT since June 1994,  serving as Executive Vice
President,  Ventures  and  Alliances.  He was  President of MJR  Enterprises,  a
consulting company,  from April 1994 to June 1994;  Executive Vice President and
Chief  Financial  Officer and a director of ICF Kaiser  International,  Inc., an
environmental and engineering  services company,  from April 1992 to April 1994;
and Chairman and Chief Executive Officer of Ransohoff Company, a manufacturer of
environmental and industrial equipment, from November 1989 to April 1992.

     Mr.  Salsbury has been Executive Vice President and General  Counsel of MCI
since November 1995. He was a partner in the law firm of Jenner & Block for more
than five years prior thereto.

     Mr. Case has been Vice President and Controller of MCI since September 1995
and a Vice  President of MCIT since October 1993. For more than five years prior
thereto, he served MCIT in various management capacities.



<PAGE>


PAGE 23





Directors of the Registrant
---------------------------
(as of December 31, 1997)

Stock ownership of the directors,  and related  footnotes,  is incorporated into
this  Annual  Report  on Form  10-K by  reference  to  pages  131 and 132 of the
registrant's  Proxy  Statement  for the Special  Meeting of  Stockholders  dated
January 22, 1998.

Clifford L. Alexander, Jr. (64)(A)(N)              1982

President of Alexander & Associates,  Inc., management consultants,  since 1981;
director of Dreyfus 3rd Century Fund, Dreyfus General Family of Funds, Mutual of
America Life Insurance Company,  Dun & Bradstreet  Corporation and American Home
Products Corporation, Cognizant Corporation and TLC Holdings, Inc.

Judith Areen (53)(A)(N)                            1992

Executive Vice President for Law Center Affairs and Dean of the Law
Center, Georgetown University, since 1989; Professor of Law,
Georgetown University, since 1976.

Michael H. Bader (68)(A)                           1968

Member of the law firm Haley Bader & Potts PLC;  Chairman of radio stations WGLL
and WCBG from 1983 to 1993;  Chairman of radio  station  WTHU from 1988 to 1993;
Vice President of Bach n' Roll Radio of Brandon, Inc. since 1989.

Sir Peter L. Bonfield (53)                         1996

Chief  Executive of BT, a worldwide  telecommunications  company,  since January
1996;  Chairman and Chief Executive of ICL plc from 1985 to 1995;  non-executive
Chairman of ICL plc since 1996; non- executive Director of BICC PLC from 1992 to
1996;  non-executive Director of ZENECA Group PLC; Vice President of the British
Quality Foundation; Chairman of DESC Ltd to 1996.

Robert P. Brace (47)                               1997

A director and Group Finance  Director of BT since  October  1993;  joined BT in
1989 as Finance Director of its UK Division.



<PAGE>


PAGE 24



Richard M. Jones (71)(C)(F)                        1988

A director  of Guaranty  Federal  Savings  Bank,  formerly a director of Applied
Power and Illinois Tool Works Inc.

Gordon S. Macklin (69)(C)(F)                       1988

Chairman, White River Corporation; director, Fund American Enterprises Holdings,
Inc.; CCC Information Services Group, Inc.;  MedImmune,  Inc.; Shoppers Express;
Spacehab,  Inc.; and director,  trustee or managing general partner, as the case
may be of 52 of the  investment  companies  in the Franklin  Templeton  Group of
Funds; formerly Chairman,  Hambrecht and Quist Group;  director,  H&Q Healthcare
Investors; and President, National Association of Securities Dealers, Inc.

Bert C. Roberts, Jr. (55)(F)(N)                    1985

Richard B. Sayford (67)(C)                         1980

President and Chief Executive Officer of Strategic Enterprises,
Inc., a management consulting firm, since 1986; a director of Laser
Technologies, Inc. and Visx, Inc.

Gerald H. Taylor (56)                              1994

Judith Whittaker (59)(C)                           1985

Vice President, General Counsel and Secretary of Hallmark Cards, Incorporated, a
greeting card and gift manufacturing  company, since January 1997; prior to that
Corporate Vice President - Legal of Hallmark  Cards,  Incorporated,  since 1992;
Associate  General Counsel of Hallmark Cards,  Incorporated,  for more that five
years prior thereto;  Vice President and General Counsel of Univision  Holdings,
Inc., a subsidiary of Hallmark Cards, Incorporated, from 1988 to 1992.

John R. Worthington (67)(A)                         1968

A consultant since March 1996. General Counsel of MCI from 1971 to November 1995
and a Senior Vice President of MCI from November 1995 to March 1996.





<PAGE>


PAGE 25


Section 16(a) Beneficial Ownership Reporting Compliance

      Based  solely  upon  review of Forms 3, 4 and 5 (and  amendments  thereto)
furnished  to MCI during or in respect of the  fiscal  year ended  December  31,
1997,  MCI is not aware of any director or executive  officer who has not timely
filed reports required by Section 16(a) of the Exchange Act during or in respect
of such fiscal year,  except John  Gerdelman,  Bert C. Roberts,  Jr. and John R.
Worthington who each filed one Form 4 late with respect to one transaction.





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<PAGE>


PAGE 26



Item 11.  Executive Compensation.
--------------------------------
<TABLE>
<CAPTION>

                           SUMMARY COMPENSATION TABLE

                                                 Annual Compensation                       Long Term Compensation Awards
                                                                                                      Securities
Name and Principal                                              Other Annual    Restricted Stock      Underlying      All Other
Position                                 Salary      Bonus      Compensation    Award(s)              Options       Compensation
                                Year        ($)      ($)(1)        ($)(2)          ($)(3),(4)            (#)(4)       ($)(5)
============================= ======= =========== ============ =============== ===================  ============= =================
<S>                             <C>    <C>         <C>               <C>               <C>              <C>           <C>


Bert C. Roberts, Jr.            1997   1,000,000   4,800,000               0                   0         90,000         4,449
Chairman                        1996     960,000           0               0           7,205,000        180,000         6,030
                                1995     890,000   1,300,000         231,703                   0        150,000         6,030

Gerald H. Taylor                1997     700,000   3,966,667               0                   0         65,000         6,365
Chief Executive Officer         1996     565,000           0               0           5,185,000        130,000         6,030
                                1995     525,000     800,000          76,914                   0        100,000         6,030

Timothy F. Price                1997     550,000   3,600,000               0                   0         57,500         6,365
President and Chief             1996     460,000     150,000               0           3,352,500        115,000         6,030
Operating Officer               1995     400,000     600,000          28,607             597,500        115,000       136,849


Michael J. Rowny                1997     350,000   1,850,000         908,375                   0         40,000        13,074
Executive Vice President        1996     310,000           0               0           1,072,500         80,000        11,679
                                1995     270,000     300,000               0             597,500         70,000         8,788


Douglas L. Maine                1997     330,000   1,775,000                0                  0         40,000         6,123
Executive Vice President        1996     290,000           0                0            895,500         70,000         4,123
and Chief Financial Officer     1995     260,000     265,000           26,077            478,000         70,000         6,030



===================================================================================================================================
</TABLE>


(1)  The  amounts  listed as paid in this  column do not  include  the amount of
     bonus (otherwise payable currently in cash) invested at the election of the
     executive in incentive stock units ("ISUs"). Such amount are reported under
     the  Restricted  Stock  Awards  column.  The  1997  bonus  consists  of the
     following  (a)  1997  Incentive  Award  and (b) an award  made  from a cash
     retention award pool established in connection with the MCI/WorldCom Merger
     to provide retention incentive for MCI senior executives.  One third of the
     retention  incentive was paid December 1, 1997.  The  applicable  incentive
     amounts  for  each  executive  are:  Mr.  Roberts  (a)  $1,300,000  and (b)
     $3,500,000;  Mr.  Taylor (a)  $800,000  and (b)  $3,166,667;  Mr. Price (a)
     $600,000 and (b) $3,000,000; Mr. Rowny (a) $350,000 and (b) $1,500,000; and
     Mr. Maine (a) $275,000 and (b) $1,500,000.

(2)  Represents the annuity premium and taxes paid on behalf of the executive as
     the result of the  purchase  of an annuity to  discharge  the  Supplemental
     Pension Plan's obligation to the executive. These amounts reduce dollar for
     dollar  the  actual  amount of  pension  to be paid to the  executive  upon
     retirement.  The 1997 amount for Mr. Rowny  includes  relocation  costs and
     related taxes of $893,698 for Mr. Rowny's relocation to and return from the
     United Kingdom.

(3)  No restricted  shares or ISUs were awarded in 1997 to the named executives.
     No bonus was deferred into ISUs. As of December 31, 1997,  executives  held
     the following  restricted  shares and non vested ISUs,  valued based on the
     market  price  on  December  31,  1997 as  follows:  Mr.  Roberts,  255,736
     restricted shares, 44,167 ISUs, valued at $12,814,024; Mr. Taylor, 229,641
     ISUs, valued at $9,831,505; Mr. Price, 154,138 ISUs, valued at $6,599,033;
     Mr. Rowny,  76,940 ISUs, valued at $3,293,993;  and Mr. Maine, 52,573 ISUs,
     valued at $2,250,782.

(4)  Stock  options,  restricted  stock  awards  and ISUs  granted  on or before
     November 9, 1997, which are outstanding on the merger date, will fully vest
     upon the close of the MCI/WorldCom merger.

(5)  Consists  of  the  following:  (a)  contributions  by  the  Company  to the
     executives'  accounts under the MCI ESOP and 401(k);  and for Mr. Rowny (b)
     premiums paid by the Company for executive life insurance  during the year.
     The values of the applicable components for each executive officer are: Mr.
     Roberts (a) $4,449;  Mr. Taylor (a) $6,365; Mr. Price (a) $6,365; Mr. Rowny
     (a) $6,285 and (b) $6,789; and Mr. Maine (a) $6,123.

<PAGE>


PAGE 27
<TABLE>
<CAPTION>

                                                 OPTION GRANTS IN LAST FISCAL YEAR(1)

                                                                                
                                                                              


                       Number of     % of Total                               Potential Realizable Value at Assumed Annual Rates
                        Securities    Options                                   of Stock Price Appreciation for Option Term(2)
                       Underlying     Granted       Exercise
                         Options        to           or Base
                         Granted     Employees in     Price      Expiration
Name                     (#)(3)       Fiscal Year   ($/Sh)(4)      Date(5)    0% ($)(6)       5% ($)              10% ($)
----------------------  ----------   ------------  ------------- ------------ --------- ---------------- -----------------------
<S>                    <C>             <C>           <C>           <C>          <C>       <C>                     <C>

Bert C. Roberts, Jr.      90,000         0.688%       36.25        2/05/07      0              2,052,000               5,199,300

Gerald H. Taylor          65,000         0.497%       36.25        2/05/07      0              1,482,000               3,755,050

Timothy F. Price          57,500         0.440%       36.25        2/05/07      0              1,311,000               3,321,775

Michael J. Rowny          40,000         0.306%       36.25        2/05/07      0                912,000               2,310,800

Douglas L. Maine          40,000         0.306%       36.25        2/05/07      0                912,000               2,310,800

-----------------------------------------------------------------------------------------------------------------------------------
All Optionees(7)       13,079,895      100.00%       $36.2663       various     0            298,008,931             755,412,859

All Stockholders          N/A             N/A          N/A             N/A      0         19,039,520,388(8)       48,248,417,881(8)
===================================================================================================================================
</TABLE>


(1)  The Company did not grant any stock appreciation  rights during the last or
     any prior fiscal year.

(2)  The potential realizable value uses the hypothetical rates specified by the
     SEC and is not  intended to forecast  future  appreciation,  if any, of the
     Company's stock price.  The Company did not use an alternative  formula for
     this  valuation  as the  Company  is not aware of any  formula  which  will
     determine with reasonable  accuracy a present value based on future unknown
     or volatile  factors.  In fact, the Company disavows the ability of this or
     any other valuation model to predict or estimate the Company's future stock
     price or to  place a  reasonably  accurate  present  value  on the  options
     because all models  depend on  assumptions  about the stock's  future price
     movement,  which is simply unknown. The value indicated is a net amount, as
     the aggregate  exercise price has been deducted from the final  appreciated
     value.  An annual  appreciation  of 5% and 10% from the  exercise  price of
     $36.25  would  result in per  share  prices  of  approximately  $59.05 and
     $94.02, respectively, as of February 5, 2007.

(3)  Grants become  exercisable to the extent of one-third of the shares covered
     thereby on each of the first,  second and third  anniversary  of the grant.
     Vesting may be  accelerated  upon a  reorganization  event or upon a tender
     offer for 30% or more of the  Company's  voting  stock by a third  party in
     accordance with plan provisions.  Pursuant to the Merger Agreement, options
     granted prior to November 9, 1997 become fully vested and exercisable  upon
     the closing of the Merger.

(4)  The exercise  price of the options is equal to the fair market value of the
     underlying stock on the date of grant.

(5)  All options granted in 1997 expire ten years from the date of grant.

(6)  Unless the stock  price  increases,  which will  benefit  all  stockholders
     commensurately, an optionee will realize no gain.

(7)  Options were granted to 8,202  employees in 1997. The potential  realizable
     value uses a 10-year option term and base price of $36.2663.

(8)  Values were calculated using the total shares outstanding  (including Class
     A Common  Stock) as of December 31, 1997  (707,066,025  shares) and using a
     base  price of  $42.8125.  Appreciation  of 5% and 10% would  result in per
     share prices of approximately $69.74 and $111.05, respectively, at December
     31,  2007.  The values set forth in the table do not reflect the effects of
     the merger.



<PAGE>


PAGE 28
<TABLE>
<CAPTION>

                                                          AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                                                                     AND FY-END OPTION VALUES

                                                                    Number of Securities         Value of Unexercised In-the-Money
                                                                    Underlying Unexercised          Options at FY-End ($)(1)
                                                                     Options at FY-End (#)
Name                    Shares Acquired on      Value Realized ($)   Exercisable/Unexercisable      Exercisable/Unexercisable
                           Exercise (#)
-----------------------------------------------------------------------------------------------------------------------------------
<S>                          <C>                 <C>                   <C>                           <C>

Bert C. Roberts, Jr.         560,000             16,401,496            658,400/261,600               13,286,175/3,472,575

Gerald H. Taylor                   0                      0            563,070/186,100               13,251,186/2,438,731

Timothy F. Price             237,470              4,272,415              6,800/173,650                  162,775/2,377,841

Michael J. Rowny                   0                      0            152,600/117,400                3,082,063/1,571,063

Douglas L. Maine                   0                      0            363,300/110,700                8,841,244/1,480,194

===================================================================================================================================
</TABLE>


(1)  Options are  "in-the-money"  if, on December 31, 1997,  the market price of
     the Common Stock  ($42.8125)  exceeded the exercise  price of such options.
     All options, on December 31, 1997, were  "in-the-money".  The value of such
     options is calculated by determining  the difference  between the aggregate
     market  price of the Common  Stock  covered by the options on December  31,
     1997 and the aggregate exercise price of such options.



<PAGE>


PAGE 29
<TABLE>
<CAPTION>


             Long-Term Incentive Plans -- Awards in Last Fiscal Year


          (a)                        (b)                      (c)
                                  Number of               Performances or
                                Shares, Units            Other Period Until
                                  or Other                 Maturation or
Name                            Rights($)(1)                 Payout(2)
-------------------------------------------------------------------------------
<S>                             <C>                     <C>
Bert C. Roberts, Jr.            7,000,000               12/1/98;12/1/99

Gerald H. Taylor                6,333,333               12/1/98;12/1/99

Timothy F. Price                6,000,000               12/1/98;12/1/99

Michael J. Rowny                3,000,000               12/1/98;12/1/99

Douglas L. Maine                3,000,000               12/1/98;12/1/99

===============================================================================
</TABLE>


(1)  Represents the dollar amount of the retention  incentive  award granted but
     not yet paid to each named  executive by the board of directors on December
     1, 1997.

(2)  The retention incentive awards will be paid over three years. One-third was
     received by the executive on December 1, 1997;  and one-third  will be paid
     on each of December 1, 1998 and  December  1, 1999.  Any amounts  remaining
     unpaid at the merger date will be paid to the executive upon the closing of
     the Merger.




<PAGE>


PAGE 30



Pension Plans

      MCI sponsors a tax-qualified defined benefit plan ("Qualified Plan") and a
supplemental   nonqualified  defined  benefit  plan  ("Supplemental  Plan"  and,
together with the  Qualified  Plan,  the "Pension  Plans").  The Qualified  Plan
covers all employees of MCI,  including  executive  officers,  who work at least
1,000 hours in a year. The  Supplemental  Plan covers only MCI's key executives,
including  the executive  officers,  who work at least 1,000 hours in a year. No
employee  contributions  are required for  participation  in the Pension  Plans.
Retirement  benefits  are based  upon the  employee's  compensation  during  the
employee's employment with MCI or a participating subsidiary.

         Compensation  used to calculate  benefits  includes bonuses  (including
bonuses  invested in ISUs) but does not include  compensation  related to fringe
benefits,  stock options or restricted stock. During 1997,  compensation for the
purposes of calculating  pension  benefits for the Qualified Plan was limited by
section  401(a)(17)  of the  Internal  Revenue  Code of 1986,  as  amended  (the
"Code"),  to  $160,000.  The  Supplemental  Plan  pays the  incremental  benefit
attributable to that part of the employee's  compensation which exceeds the Code
limitation in any plan year.

         Employees are fully vested upon the earlier of five years of service or
upon reaching age 65 while employed by MCI or a participating subsidiary.  There
is no partial vesting. Normal retirement age is 65, but an employee may elect to
receive  an  actuarially-reduced  pension  at or after age 55 with five years of
service with MCI or a participating  subsidiary.  In addition,  the Supplemental
Plan permits MCI to grant additional  service and additional  pension amounts to
selected employees.

         For employees employed after January 1, 1989, the Pension Plans provide
a normal retirement benefit for each year of credited service equal to 1% of the
compensation  earned by the employee  during that year up to the Social Security
"covered compensation" level plus an additional 1.5% of compensation earned over
that  level.  However,  employees  employed  on or before  January  1, 1993 were
credited with an updated past service  benefit which provides a benefit of 1% of
the employee's  average annual  compensation (for the years 1990, 1991 and 1992)
up to  $21,000  and  1.5% of such  compensation  over  $21,000  for  such  years
multiplied by the employee's  service  through  December 31, 1992. For employees
employed on or after January 1, 1994, the Pension Plans provide a future service
benefit for each subsequent year of credited service equal to a flat 1.8% of the
employee's eligible compensation.  Effective January 1, 1996, MCI adopted a Part
II to the  Qualified  Plan ("Part II") which changed the manner in which pension
benefits will be determined.  Part II is a defined benefit  pension plan.  Under
Part II an initial  account balance has been  established  for each  participant
equal to the actuarial  equivalent of the participant's prior accruals under the
Qualified Plan. Participants employed on or after 


<PAGE>


PAGE 31


January 1, 1996  receive  compensation  credits  and  interest  credits to their
accounts.  Compensation  credits are a designated  percent of pay,  based on the
participant's age, according to the following  schedule:  employees younger than
age 25, 2.0%;  age 25-29,  2.5%; age 30-34,  3.0%;  age 35-39,  4.0%; age 40-44,
5.0%; age 45-54,  6.0%; and age 55 or older,  6.5%. Part II guarantees a minimum
interest  credit of 4% per year on the prior year's account  balance.  For 1997,
the guaranteed interest credit is 6.09%. Part II Participants who were age 50 or
older with 5 years of  service as of  December  31,  1995 will  accrue a pension
benefit  equal to the  greater of  benefits  calculated  under Part I or Part II
until the Plan year ended  December  31, 2000 for each year they are employed by
MCI.

       Benefits  payable from tax qualified plans are further limited by section
415 of the Code; in 1997, the annual maximum benefit from the Qualified Plan was
limited to  $125,000.  When the pension  formula  would  result in an  executive
receiving a benefit above the applicable limit, the Supplemental Plan assumes an
obligation to pay the incremental portion above such limit.

         As of December 31, 1997,  Messrs.  Roberts,  Taylor,  Price,  Rowny and
Maine, upon normal retirement,  would be entitled to annual retirement  benefits
from the Pension Plans of approximately $648,394;  $310,662;  $272,964; $128,668
and $149,451,  respectively.  Mr. Rowny will not vest under the plans until June
1998.  Should Mr.  Rowny leave MCI before he vests,  he will  receive no pension
benefit from MCI.

Compensation of Directors

         During 1997,  directors of MCI who were not officers  were  entitled to
receive a retainer of $2,250 per month and an additional $1,500 for each meeting
of the board of directors  which they attended and for each meeting of the Audit
or Compensation  Committee they attended that was not held on the day or the day
preceding  the day on which a meeting  of the board of  directors  was held.  In
addition, the Chairman of each of the Audit and Compensation Committees received
an  additional  retainer  of $300 per  month,  and each  member of the Audit and
Compensation  Committees who attended an Audit or Compensation Committee meeting
on the day or the day  preceding  the day on which a board of directors  meeting
was held was paid an additional $700 for each such meeting  attended.  Directors
also were  reimbursed  for actual  out-of-pocket  travel  expenses  incurred  in
connection with attendance at board and/or committee meetings.

Employment Contracts

     In November  1996,  MCI entered  into  employment  contracts  with  Messrs.
Roberts,  Taylor,  Price,  Rowny  and  Maine.  The  summary  description  of the
employment  contracts on pages 63 through 65 of MCI's  Proxy  Statement  for the
Special  Meeting of Stockholders  dated January 22, 1998 is  incorporated  into
this Annual Report on Form 10-K by reference.


<PAGE>


PAGE 32




Compensation Committee Interlocks and Insider Participation

         During 1997, no member of the Compensation  Committee of MCI's board of
directors  was a current  or former  officer  or  employee  of MCI or any of its
subsidiaries.  No executive  officer of MCI serves as a member of a compensation
committee of another entity,  one of whose  executive  officers is a director of
MCI.


MCI COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
-----------------------------------------------------------

MCI Executive Compensation Policies and Objectives
--------------------------------------------------

         The   Compensation   Committee  of  MCI's  board  of   directors   (the
"Compensation  Committee")  evaluates  and sets the base  salary  and  incentive
compensation  for the Chairman,  Chief  Executive  Officer ("CEO") and the Chief
Operating  Officer ("COO") of MCI and  administers  MCI's Stock Option Plans and
the  Executive  Incentive  Compensation  Plan  (the  "EICP").  The  Compensation
Committee also  establishes the target awards and performance  goals for the CEO
and COO under the Senior Executive  Incentive  Compensation  Plan (the "SEICP").
The Compensation Committee reviews, but does not evaluate, determine or approve,
the  compensation  of MCI's other  executives,  which is  determined  by the CEO
and/or COO with the assistance of MCI's human resources staff.

       The Compensation  Committee consists solely of non-employee directors who
are not eligible to participate in the compensation plans which they administer.

         The Compensation  Committee's executive compensation objectives are (1)
to ensure competitive levels of compensation that enable MCI to attract,  retain
and  motivate  executives  of  outstanding  ability  and  character  to lead MCI
successfully  in  its  highly  competitive   industry   characterized  by  rapid
technological   change,    innovation   and   significant   capital   investment
requirements; (2) to tie a meaningful portion of compensation to the achievement
of improved long term stockholder  value and other business  objectives  through
the EICP and the SEICP; and (3) to provide stock-based long term incentives that
directly  link the  compensation  of executives  to  appreciation  in the Common
Stock. The Compensation  Committee accomplishes these objectives by periodically
reviewing surveys of executive compensation,  by establishing an annual EICP and
by setting performance levels and target awards under the SEICP.  Through annual
grants of options,  incentive  stock units and, at times,  awards of  restricted
stock, the Compensation  Committee  strives to align the financial  interests of
the executives with those of MCI's stockholders.


<PAGE>


PAGE 33



MCI Executive Officer Compensation and MCI Performance
------------------------------------------------------

         MCI has standard  salary ranges for all executive  positions  below the
level of Chairman, CEO and COO. These salary ranges are developed by MCI's human
resources  staff  from  surveys  conducted  by  compensation  consultants  using
competitive market data from similarly sized companies in the telecommunications
industry,  as well as other  industries.  This group of  companies  includes all
companies that comprise MCI's peer group used in constructing  MCI's performance
graph.  (See the  section  of this Form 10-K  entitled,  "Five-Year  Performance
Comparison,"  below.) Salary range midpoints are targeted to be at approximately
the median of the survey data for companies of similar size and  complexity.  An
executive's  salary  within these  salary  ranges  depends upon the  executive's
experience and  capabilities,  the executive's  unique talents and strengths and
the  executive's  contribution  to  MCI.  The  CEO,  the COO or  another  senior
executive  responsible  for the business  unit  annually  reviews the salary and
performance  of  executives  in the business  unit.  In this review,  individual
contribution,  attainment of individual and business unit performance objectives
and level within the salary range are considered;  however, there is no specific
weight given to each criterion.

       The purpose of the EICP is to encourage  consistent growth in stockholder
value by creating a motivational environment in which compensation is contingent
upon the  performance  of MCI;  the business  unit,  where  applicable;  and the
individual. All executive officers participate in the EICP.

         At the beginning of MCI's 1997 fiscal year, the Compensation  Committee
approved a 1997 EICP.  Target  awards were  designed to provide a level of total
cash compensation,  including salary,  between the 50th and 75th percentiles for
similar  companies,  including those in MCI's peer group,  if performance  goals
were achieved.  The  Compensation  Committee set overall  financial  performance
goals for the executives  covered by the plan. In addition,  in order to tie the
executive's  incentive  award  more  closely  to  such  executive's  performance
objectives for the year, the EICP provided the business units with discretion in
determining  individual  performance  measurements and resulting awards for each
executive.  Prior to the end of the first quarter of 1997, the senior management
of the business units  established the individual  performance  criteria for the
executives in their  respective  business units.  The performance  criteria were
based  on  each  executive's   individual   performance   objectives,   and,  as
appropriate, business unit's objectives. The performance criteria for the senior
management of the business  units were  established  by the COO and CEO and were
based on MCI's business plan with  consideration  for business unit  performance
and individual contribution.

         In 1996, the Compensation Committee recommended, MCI's board of
directors adopted and MCI stockholders approved the SEICP.  The SEICP was


<PAGE>


PAGE 34


designed to allow compensation  awarded under it to qualify as performance based
compensation  meeting the requirements of section 162(m) of the Internal Revenue
Code of 1986,  as amended.  The SEICP  entitles  MCI to deduct for tax  purposes
amounts  awarded under the SEICP that would not otherwise be deductible  for tax
purposes.

         Under the SEICP, the Compensation  Committee sets financial performance
goals based on factors  specified  in the plan,  and sets ranges of awards to be
granted if  performance  goals are met,  subject to the  SEICP's  maximum  award
limits. In 1997, the Compensation  Committee set goals for the Chairman, CEO and
the COO using the SEICP factors.

       MCI has a long history of encouraging  employee ownership of MCI's Common
Stock. In the belief that employees who have a proprietary  interest in MCI will
focus  on  its  long  term  success  and on  building  stockholder  wealth,  the
Compensation  Committee  uses  MCI's  Stock  Option  Plan as a basis to create a
foundation for the long-term  growth of MCI and increased  stockholder  value by
providing executives and key employees with an opportunity to obtain and build a
meaningful  stake in MCI's  future.  At the  beginning of each fiscal year,  the
Compensation  Committee grants stock options to executives and key employees who
are  recommended  by  management  as being in a position to  contribute to MCI's
profitability.   Option  awards  are  intended  to  encourage   contribution  to
profitability  over a longer  term  than the  EICP.  Therefore,  options  become
exercisable  based  on  continued  employment  with  MCI  and  generally  remain
exercisable for a period of ten years. To provide the desired level of potential
stock  ownership,  the number of stock options granted to Company  executives is
targeted to be above average in  comparison to executives in similar  companies,
including  those in MCI's  peer  group.  The  number  of  options  granted  to a
particular  executive  is  based  on  the  grade  level  of  the  executive  and
management's assessment of the executive's  performance and contribution.  Stock
options  have been granted to key  employees at all levels of MCI's  management.
The ultimate value of the options,  if any, depends on the extent to which MCI's
Common Stock appreciates in market value.

         The Stock  Option  Plan  allows  the  Compensation  Committee  to award
incentive stock units.  Incentive stock units are an unfunded promise to deliver
shares of stock in the future.  Incentive  stock units are awarded to executives
under the terms of a program  called the  Executive  Stock  Award  Program  (the
"ESA").  Under the ESA,  cash target  awards are set for each  executive  salary
range and awards determined based on the same performance  criteria as the EICP.
Cash awards are  converted to  incentive  stock units by dividing the cash award
amount  by the MCI  Common  Stock  price  on the  date  awards  are  determined.
Incentive  stock  units  granted  under the ESA vest  ratably  over a three year
period.

         MCI's Executive Deferred  Compensation Plan permits executives to defer
all or a portion of their cash bonus into incentive stock units. MCI matches the
executive's deferral with an additional grant of one incentive 


<PAGE>


PAGE 35


stock unit for each four incentive  stock units  voluntarily  purchased with the
executive's  bonus.  The  incentive  stock  units  used to match  the  voluntary
purchase  vest  ratably  over a three year period.  The  Compensation  Committee
believes  that the use of  incentive  stock units  fosters the same goals as the
grant of stock options with the added benefit of providing  more  flexibility on
timing of recognition of income related to such instruments as well as promoting
continued investment in MCI Common Stock.

Other Executive Compensation Plans
----------------------------------

         MCI sponsors  other  employee  benefit  plans for both  executives  and
non-management  employees.  In  addition  to the  Supplemental  Retirement  Plan
relating to executive retirement  benefits,  MCI has an executive life insurance
program for executives. The Compensation Committee neither administers nor makes
any determinations with respect to any such plan or program,  with the exception
of MCI's 1990 Employee Stock Purchase Plan.

Compensation of MCI's Chairman, Chief Executive Officer and Chief Operating
---------------------------------------------------------------------------
Officer and Company Performance
-------------------------------

         The Chairman,  Bert C. Roberts, Jr.; the CEO, Gerald H. Taylor; and the
President  and COO,  Timothy F.  Price  participate  in the SEICP.  In the first
ninety days of 1997, the Compensation Committee set performance goals and target
awards for these top three officers using the SEICP guidelines. The Compensation
Committee also established their 1997 salaries.

         The  Compensation  Committee  conducts  an  annual  evaluation  of  the
competitiveness  of Messrs.  Roberts',  Taylor's and Price's total  compensation
relative to the  compensation  of the Chairmen,  CEOs and COOs of other similar-
sized  companies  in  the  telecommunications  industry  as  well  as  in  other
industries. The Compensation Committee considers compensation data available for
the  companies  in  MCI's  peer  group,  as well as data  available  from  other
similar-sized  companies  not in the peer group  because it considers the market
for Messrs.  Roberts',  Taylor's and Price's  skills and strengths  much broader
than  the  telecommunications   industry.  As  part  of  this  evaluation,   the
Compensation  Committee  annually  requests a market  analysis  of  compensation
levels by a  nationally-known  compensation  consulting  firm. The  compensation
consulting firm also furnishes other  information to the Compensation  Committee
as requested or needed.  Salaries are targeted to be approximately at the median
of salaries of top  executives  of companies  of similar  size,  complexity  and
performance.  Based on a  review  of  corporate  performance  relative  to MCI's
business plan, Messrs.  Roberts',  Taylor's and Price's individual  performance,
information  supplied by the  consultant,  the expected  challenges  for Messrs.
Roberts,  Taylor  and  Price in the  coming  year  and  other  factors  that the
Compensation 


<PAGE>


PAGE 36


Committee in its  discretion  may deem relevant at that time,  the  Compensation
Committee establishes the salaries for the new fiscal year.

         Under the SEICP,  the Compensation  Committee  develops the performance
goals for determining  Messrs.  Roberts',  Taylor's and Price's annual incentive
award using one or more of the  measurable  financial  criteria  required by the
Plan, i.e., revenue;  operating income; earnings before interest expense, taxes,
depreciation,  amortization  and  other  non-cash  items  ("EBITDA");  return on
equity;  return on assets;  and economic value added. In 1997, the  Compensation
Committee  set financial  targets for net revenue and earnings  before taxes and
noted that because of the proposed merger with British  Telecommunications  plc,
there  might be a need to  adjust  the  results  for  extraordinary  items.  The
financial  targets were weighted  equally in  determining  whether the financial
goals  were met and  applied  to each of the  Chairman,  CEO and  COO,  but were
weighted  differently  for their total award when compared to their  qualitative
objectives.  The qualitative performance goals adopted for the Chairman, CEO and
COO  were:   1)   achievement   of   certain   strategic   goals  in  the  local
telecommunications   market;   2)   completion   of  the  merger  with   British
Telecommunications  plc with  emphasis  on  achieving  a stock  price above that
estimated on the  announcement of the  transaction;  3) shifting certain revenue
from minutes based revenue to services  based  revenue;  and 4)  maintenance  of
strong organizational capabilities, despite increasing competitive pressures for
management talent. In addition to these qualitative performance goals, Mr. Price
had two  additional  goals:  1) to  maintain  product and market  leadership  in
integrated services,  virtual data services and Internet services and to develop
momentum in "new to MCI" or emerging  markets and 2) to develop MCI's management
team to improve  diversity of skill sets, to provide greater  flexibility as MCI
enters new markets and to  creatively  sustain  MCI's  management  team  despite
aggressive recruitment by other companies.

         Additionally,  the Compensation Committee established minimum levels of
Company  performance  below which no performance award would be made and maximum
levels above which the executives would not earn additional amounts.

         In February 1998, the Committee met to evaluate the  performance of the
top three  executives.  It recognized 1997 had been an unusual year and that the
executives   performance   should  be  viewed  against  the  background  of  the
difficulties  the Company  experienced  in being able to enter the local  market
profitably,  the  uncertainty  arising  from  the  renegotiation  of the  merger
agreement with BT, the unsolicited  acquisition offers from WorldCom and GTE and
the execution of the WorldCom merger  agreement and termination of the BT merger
agreement  and the impact of these events on the  employees  and  customers.  It
reviewed the Company's performance against the previously  established financial
goals,  appropriately  adjusted to reflect special items, and noted the role the
executives  had played in retaining and  motivating  the Company's key employees
and in maintaining the

<PAGE>


PAGE 37


Company's momentum during this period of uncertainty.  It further recognized the
benefit  to the  Company  and its  stockholders  of the  merger  agreement  with
WorldCom. As a result, the Compensation  Committee awarded an incentive award of
$1.3 million to Mr. Roberts, $800,000 to Mr. Taylor, and $600,000 to Mr. Price.

         In  preparation  for making any decision  regarding  the grant of stock
options and/or  restricted stock, the Compensation  Committee  evaluated Messrs.
Roberts',  Taylor's and Price's performance relative to the guidelines described
above, MCI's achievements  during the year (discussed above), the awards made to
them in prior years,  their  differing  yet critical  leadership  roles in MCI's
future  success and noted the degree to which other  companies have linked their
Chairman's,  CEO's and COO's long term compensation to stockholder  return.  The
Compensation  Committee also used subjective  criteria it deemed relevant in its
reasonable  business  discretion,  such  as  its  opinions  about  the  business
environment  and the  particular  challenges  for  MCI as well as the  potential
market for Messrs.  Roberts',  Taylor's and Price's services.  In addition,  the
Compensation  Committee  considers awards under the Stock Option Plan as a means
to align the financial  interest of the Chairman,  the CEO and the COO with that
of MCI's stockholders.

Richard M. Jones
Gordon S. Macklin
Richard B. Sayford
Judith Whittaker
Members of the Compensation Committee


Five-Year Performance Comparison

         Set forth below is a graphical presentation comparing MCI's cumulative,
five-year stockholder returns on an indexed basis with the Standard & Poor's 500
Stock Index and an index of peer  companies  selected by MCI. MCI has selected a
peer group  generally  consisting of the major  providers of  telecommunications
services.  The members of the peer group are the following:  AT&T Corp.,  Sprint
Corporation,  NYNEX Corporation (merged with Bell Atlantic Corporation 9/15/97),
Bell Atlantic Corporation,  BellSouth Corporation,  Ameritech  Corporation,  SBC
Communications,  Inc., US West,  Inc.,  Pacific  Telesis Group  (acquired by SBC
Communications,   Inc.  5/19/97)  and  GTE  Corporation.   For  the  purpose  of
calculating  the peer  group  average,  the  returns of each  company  have been
weighted  according to its stock market  capitalization.  The  measurements  are
indexed to a value of $100 at December 31, 1992,  and assume that all  dividends
are reinvested.





<PAGE>


PAGE 38


Performance Graph

                   MCI Communications Corporation
                  Five-Year Cumulative Total Return
                   for MCI, Peer Group and S&P 500


              | 92Q4 | 93Q1 | 93Q2 | 93Q3 | 93Q4 | 94Q1 | 94Q2
              |--------|--------|--------|--------|--------|--------|--------
MCI           | $100   |$112.306|$145.24 |$139.557|$142.861|$118.208|$112.013
--------------|--------|--------|--------|--------|--------|--------|--------
S&P 500 Index | $100   |$104.367|$104.875|$107.585|$110.079|$105.905|$106.351
--------------|--------|--------|--------|--------|--------|--------|--------
Peer Group    | $100   |$110.96 |$116.674|$121.667|$113.567|$108.434|$114.673


              | 94Q3 | 94Q4 | 95Q1 | 95Q2 | 95Q3 | 95Q4 | 96Q1
              |--------|--------|--------|--------|--------|--------|--------
MCI           |$129.732| $93.146|$104.552|$111.66 |$132.277|$132.72 |$153.676
--------------|--------|--------|--------|--------|--------|--------|--------
S&P 500 Index |$111.551|$111.534|$122.393|$134.078|$144.732|$153.446|$161.682
--------------|--------|--------|--------|--------|--------|--------|--------
Peer Group    |$113.782|$108.282|$115.967|$142.381|$168.256|$183.867|$173.105


              | 96Q2 | 96Q3 | 96Q4 | 97Q1 | 97Q2 | 97Q3 | 97Q4
              |--------|--------|--------|--------|--------|--------|--------
MCI           |$130.292|$130.292|$166.335|$181.286|$194.929|$149.579|$218.125
--------------|--------|--------|--------|--------|--------|--------|--------
S&P 500 Index |$168.937|$174.159|$188.677|$193.735|$227.557|$244.603|$251.625
--------------|--------|--------|--------|--------|--------|--------|--------
Peer Group    |$180.802|$162.90 |$185.565|$183.594|$203.65 |$216.206|$265.453





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<PAGE>


PAGE 39



Item 12.  Security Ownership of Certain Beneficial Owners and
-------------------------------------------------------------
Management.
----------

Security Ownership of Beneficial Holders

Class      Beneficial Owner               Beneficial Ownership     % of Class

Common            FMR Corp.                  53,466,490(1)             9.5%
 Stock            82 Devonshire Street
                  Boston, Massachusetts

Class A           British                   135,998,932 shares(2)     100%
Common            Telecommunications plc
Stock             81 Newgate Street
                  London U.K.


(1) FMR Corp.  has (i) sole  voting  power with  respect to  5,017,736  of these
shares and (ii) sole  dispositive  power with  respect  to  53,466,490  of these
shares.

(2) BT has sole voting and investment power with respect to all these shares.



Item 13.  Certain Relationships and Related Transactions.
--------------------------------------------------------


None.







<PAGE>


PAGE 40



                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on
---------------------------------------------------------------------------
Form 8-K.
--------

(a)    Documents filed as a part of this report.

       (1)  Financial Statements.

           Report of Independent Accountants

           Income Statements for the years
             ended December 31, 1997, 1996
             and 1995

           Balance Sheets at December 31, 1997
             and 1996

           Statements of Cash Flows for the
             years ended December 31, 1997,
             1996 and 1995

           Statements of Stockholders' Equity
             for the years ended December 31,
             1997, 1996 and 1995

           Notes to Consolidated Financial Statements

         The Financial  Statements and Notes thereto are incorporated  herein by
reference to Exhibit 13 of this Annual Report on Form 10-K. See Part II.

       (2)  Financial Statement Schedule.

         The following  additional  financial data should be read in conjunction
with the Financial Statements and Notes thereto which are incorporated herein by
reference to Exhibit 13.  Schedules not included with this additional  financial
data have been  omitted  because  they are not  required  or  applicable  or the
required information is shown in the Financial Statements or Notes thereto.

          Report of Independent Accountants on
            Financial Statement Schedule

          Valuation and Qualifying Accounts (Schedule II)



<PAGE>


PAGE 41


         The  Report  of  Independent  Accountants  on the  Financial  Statement
Schedule is submitted as Exhibit 99(c) to this Annual Report on Form 10-K, which
is incorporated herein by reference.

         The Financial  Statement Schedule is submitted as Exhibit 99(a) to this
Annual Report on Form 10-K, which is incorporated herein by reference.

       (3) Exhibits.

        Executive  compensation plans and arrangements required to be filed, and
which have been filed, with the Commission pursuant to Item 14(c) of this Annual
Report on Form 10-K are listed in this  Annual  Report on Form 10-K as  Exhibits
10(a)-(u).

Exhibit
  No.                          Description
------                         -----------

2    Agreement and Plan of Merger dated November 9, 1997, among WorldCom,  Inc.,
     MCI  Communications  Corporation and TC Investments Corp.  (Incorporated by
     reference to Exhibit 2 to Registrant's  Current Report on Form 8-K/A, filed
     November 14, 1997.)

3(a) Restated  Certificate of  Incorporation of MCI  Communications  Corporation
     filed on March 28,  1995.  (Incorporated  by  reference  to Exhibit 3(a) to
     registrant's  Annual Report on Form 10-K for the fiscal year ended December
     31, 1994.)

 (b) By-laws of registrant,  as amended.  (Incorporated  by reference to Exhibit
     3(ii) to registrant's Registration Statement on Form S-3, Reg. No.
     33-57155.)

4(a) Indenture,  dated as of October 15, 1989,  between  registrant  and Bankers
     Trust Company.  (Incorporated  by reference to Exhibit 4(c) to registrant's
     Registration Statement on Form S-3, Reg. No. 33-31600.)

(b)  Indenture dated as of October 15, 1989 between registrant and Bankers Trust
     Company.  (Incorporated  by  reference  to  Exhibit  4(d)  to  registrant's
     Registration Statement on Form S-3, Reg. No. 33-31600.)

(c)  Indenture  dated as of October 15, 1989 between  registrant  and  Citibank,
     N.A.   (Incorporated   by  reference   to  Exhibit  4(e)  to   registrant's
     Registration Statement on Form S-3, Reg. No. 33-31600.)


<PAGE>


PAGE 42


(d)  Indenture  dated as of February 17, 1995 between  registrant  and Citibank,
     N.A.  (Incorporated  by reference to Exhibit 4 (d) to  registrant's  Annual
     Report on Form 10-K for the fiscal year ended December 31, 1994.)

(e)  Supplement No. 1, dated as of October 4, 1996, to the  Indenture,  dated as
     of February 17,  1995,  between MCI and  Citibank,  N.A.  (Incorporated  by
     reference to Exhibit 4(e) to  registrant's  Annual  Report on Form 10-K for
     the fiscal year ended December 31, 1996.)

(f)  Supplement No. 2, dated as of March 12, 1998, to the Indenture, dated as of
     February 17, 1995, between MCI and Citibank, N.A.

(g)  Form of Senior Fixed Rate Medium-Term  Note.  (Incorporated by reference to
     Exhibit 4(a) to  Registrant's  Current Report on Form 8-K, filed October 7,
     1996.)

(h)  Form of Senior Floating Rate Medium-Term  Note.  (Incorporated by reference
     to Exhibit 4(b) to  Registrant's  Current Report on Form 8-K, filed October
     7, 1996.)

(i)  Form  of  Subordinated  Fixed  Rate  Medium-Term  Note.   (Incorporated  by
     reference to Exhibit 4(g) to  registrant's  Registration  Statement on Form
     S-3, Reg. No. 33-31600.)

(j)  Form of  Subordinated  Floating Rate  Medium-Term  Note.  (Incorporated  by
     reference to Exhibit 4(i) to  registrant's  Registration  Statement on Form
     S-3, Reg. No. 33-31600.)

(k)  Form of 7-1/2% Senior Note due August 20, 2004.  (Incorporated by reference
     to Exhibit 4 of registrant's  Quarterly Report on Form 10-Q for the Quarter
     Ended June 30, 1992.)

(l)  Form of 7-1/8% Senior Note due January 20, 2000. (Incorporated by reference
     to Exhibit 1(b) of  registrant's  Current  Report on Form 8-K filed January
     19, 1993.)

(m)  Form of 8-1/4%  Senior  Debenture  due January 20, 2023.  (Incorporated  by
     reference to Exhibit 1(c) of registrant's  Current Report on Form 8-K filed
     January 19, 1993.)

(n)  Form of  7-3/4%  Senior  Debenture  due March 15,  2024.  (Incorporated  by
     reference to Exhibit 4(a) of registrant's  Current Report on Form 8-K filed
     March 12, 1993.)


<PAGE>


PAGE 43


(o)  Form of 6-1/4% Senior Note due March 23, 1999.  (Incorporated  by reference
     to Exhibit 4(a) of registrant's  Current Report on Form 8-K filed March 15,
     1994.)

(p)  Form of  7-3/4%  Senior  Debenture  due March 23,  2025.  (Incorporated  by
     reference to Exhibit 4(b) of registrant's  Current Report on Form 8-K filed
     March 15, 1994.)

(q)  Form of 7-1/8%  Debenture due June 15, 2027.  (Incorporated by reference to
     Exhibit  4(a) of  registrant's  Current  Report on Form 8-K filed  June 21,
     1996.)

(r)  Form of 6.95% Senior Note due August 15, 2006.  (Incorporated  by reference
     to Exhibit 4(a) of registrant's  Current Report on Form 8-K filed August 8,
     1996.)

(s)  Form of Senior  Floating  Rate Note due March 16,  1999.  (Incorporated  by
     reference to Exhibit 4(c) of registrant's  Current Report on Form 8-K filed
     March 15, 1994.)

(t)  Rights  Agreement,  dated as of September 30, 1994,  between the registrant
     and Mellon  Bank,  N.A.  (Incorporated  by  reference  to  Exhibit  4(a) to
     registrant's Current Report on Form 8-K filed October 4, 1994.)

(u)  Amendment No. 1, dated as of November 3, 1996, to Rights  Agreement,  dated
     as of September  30, 1994,  between the  registrant  and Mellon Bank,  N.A.
     (Incorporated  by reference to Exhibit 2 to  registrant's  Form 8-A/A filed
     November 20, 1996.)

(v)  Amendment No. 2, dated as of August 20, 1997, to Rights Agreement, dated as
     of September 30, 1994 and amended,  between the Company and Morgan Guaranty
     Trust Company of New York, as Rights Agent.  (Incorporated  by reference to
     Exhibit 4 to registrant's Form 8-A/A filed November 20, 1997.)

(w)  Amendment No. 3, dated as of November 9, 1997, to Rights  Agreement,  dated
     as of  September  30,  1994 and  amended,  between  the  Company and Morgan
     Guaranty  Trust  Company of New York,  as Rights  Agent.  (Incorporated  by
     reference to Exhibit 5 to registrant's Form 8-A/A filed November 20, 1997.)



<PAGE>


PAGE 44


(x)  Junior  Subordinated  Indenture  between  registrant and  Wilmington  Trust
     Company,  as Debenture Trustee.  (Incorporated by reference to Exhibit 4.01
     of registrant's  Registration  Statement on Form S-3, Registration No. 333-
     02593.)

(y)  Form  of  Amended  and  Restated  Trust  Agreement  among  registrant,   as
     Depositor,  Wilmington  Trust  Company,  as Property  Trustee and  Delaware
     Trustee,  and the Administrative  Trustees named therein.  (Incorporated by
     reference to Exhibit 4.10 of  registrant's  Registration  Statement on Form
     S-3, Registration No. 333-02593.)

(z)  Form  of  Guarantee  Agreement  between  registrant,   as  Guarantor,   and
     Wilmington Trust Company, as Trustee. (Incorporated by reference to Exhibit
     4.12 of registrant's Registration Statement on Form S-3, Registration No.
     333- 02593.)

(aa) Form of  Supplemental  Indenture  between  registrant and Wilmington  Trust
     Company,  as Debenture Trustee.  (Incorporated by reference to Exhibit 4.13
     of registrant's  Registration  Statement on Form S-3, Registration No. 333-
     02593.)

10(a)1979  Stock   Option  Plan  of   registrant,   as  amended  and   restated.
     (Incorporated  by reference to Exhibit 10(a) to registrant's  Annual Report
     on Form 10-K for the fiscal year ended December 31, 1988.)

(b)  Supplemental   Retirement   Plan  for   Employees  of  MCI   Communications
     Corporation and  Subsidiaries,  as amended.  (Incorporated  by reference to
     Exhibit  10(b) to  registrant's  Annual  Report on Form 10-K for the fiscal
     year ended December 31, 1993.)

(c)  Description  of  Executive  Life  Insurance  Plan  for  MCI  Communications
     Corporation and  Subsidiaries.  (Incorporated by reference to "Remuneration
     of Officers" in registrant's Proxy Statement for its 1992 Annual Meeting of
     Stockholders.)

(d)  MCI  Communications  Corporation  Executive  Incentive  Compensation  Plan.
     (Incorporated  by reference to Exhibit 10(e) to registrant's  Annual Report
     on Form 10-K for the fiscal year ended December 31, 1995.)



<PAGE>


PAGE 45


(e)  Amendment  No.  1 to MCI  Communications  Corporation  Executive  Incentive
     Compensation   Plan.   (Incorporated  by  reference  to  Exhibit  10(e)  to
     registrant's  Annual Report on Form 10-K for the fiscal year ended December
     31, 1996.)

(f)  Form of Director  Indemnification  Agreement.(Incorporated  by reference to
     Appendix B to  registrant's  Proxy Statement for its 1987 Annual Meeting of
     Stockholders.)

(g)  1988 Directors' Stock Option Plan of registrant. (Incorporated by reference
     to Exhibit D to registrant's Proxy Statement for its 1989 Annual Meeting of
     Stockholders.)

(h)  Amendment  No. 1 to the 1988  Directors'  Stock Option Plan of  registrant.
     (Incorporated  by reference to Appendix D to  registrant's  Proxy Statement
     for its 1996 Annual Meeting of Stockholders.)

(i)  Amendment  No.  2 to 1988  Directors'  Stock  Option  Plan  of  registrant.
     (Incorporated  by reference to Exhibit 10(i) to registrant's  Annual Report
     on Form 10-K for the fiscal year ended December 31, 1996.)

(j)  Amendment  No.  3 to 1988  Directors'  Stock  Option  Plan  of  registrant.
     (Incorporated  by reference to Exhibit 10(j) to registrant's  Annual Report
     on Form 10-K for the fiscal year ended December 31, 1996.)

(k)  Stock Option Plan of registrant. (Incorporated by reference to Exhibit C to
     registrant's Proxy Statement for its 1989 Annual Meeting of Stockholders.)

(l)  Amendment No. 1 to the Stock Option Plan of  registrant.  (Incorporated  by
     reference to Exhibit 10(l) to  registrant's  Annual Report on Form 10-K for
     the fiscal year ended December 31, 1996.)

(m)  Amendment No. 2 to the Stock Option Plan of  registrant.  (Incorporated  by
     reference to Appendix B to registrant's Proxy Statement for its 1996 Annual
     Meeting of Stockholders.)

(n)  Amendment No. 3 to the Stock Option Plan of  registrant.  (Incorporated  by
     reference to Exhibit 10(n) to  registrant's  Annual Report on Form 10-K for
     the fiscal year ended December 31, 1996.)


<PAGE>


PAGE 46


(o)  Amendment No. 4 to the Stock Option Plan of  registrant.  (Incorporated  by
     reference to Exhibit 10(o) to  registrant's  Annual Report on Form 10-K for
     the fiscal year ended December 31, 1996.)

(p)  Amendment No. 5 to the Stock Option Plan of  registrant.  (Incorporated  by
     reference to Exhibit 10(p) to  registrant's  Annual Report on Form 10-K for
     the fiscal year ended December 31, 1996.)

(q)  Board of Directors Deferred Compensation Plan of Registrant.  (Incorporated
     by reference to Exhibit  10(i) to  registrant's  Annual Report on Form 10-K
     for the fiscal year ended December 31, 1994.)

(r)  The  Senior   Executive   Incentive   Compensation   Plan  of   registrant.
     (Incorporated  by reference to Appendix A to  registrant's  Proxy Statement
     for its 1996 Annual Meeting of Stockholders.)

(s)  Amendment  No. 1 to the Senior  Executive  Incentive  Compensation  Plan of
     registrant.  (Incorporated  by reference to Exhibit  10(s) to  registrant's
     Annual Report on Form 10-K for the fiscal year ended December 31, 1996.)

(t)  Executive Severance Policy.  (Incorporated by reference to Exhibit 10(a) to
     Registrant's  Quarterly Report on Form 10-Q for the quarter ended September
     30, 1996.)

(u)  Form of employment agreement, effective as of November 2, 1996, between MCI
     and  certain  executive  officers of MCI.  (Incorporated  by  reference  to
     Exhibit  10(u) to  registrant's  Annual  Report on Form 10-K for the fiscal
     year ended December 31, 1996.)

(v)  Amended  and  Restated  Investment  Agreement  dated as of January 31, 1994
     between MCI Communications  Corporation and British Telecommunications plc.
     (Incorporated by reference to Appendix I of registrant's  Notice of Special
     Meeting of Stockholders and Proxy Statement dated February 4, 1994.)

(w)  Modified  Joint  Venture  Agreement  dated as of July 1, 1994  between  MCI
     Communications  Corporation  and  British  Telecommunications  plc  and MCI
     Ventures   Corporation   and   Moorgate   (Twelve)   Limited   and  Concert
     Communications  Company.  (Incorporated  by reference  to Exhibit  10(l) to
     registrant's  Annual Report on Form 10-K for the fiscal year ended December
     31, 1994.)


<PAGE>


PAGE 47


(x)  Warrant Purchase Agreement by and between The News Corporation  Limited and
     MCI Communications Corporation dated as of August 2, 1995. (Incorporated by
     reference to Exhibit 10(p) to  registrant's  Annual Report on Form 10-K for
     the fiscal year ended December 31, 1995.)

(y)  Preferred Stock Purchase Agreement by and among MCI, News Triangle Finance,
     Inc. and News T Investments, Inc. dated as of August 2, 1995. (Incorporated
     by reference to Exhibit  10(q) to  registrant's  Annual Report on Form 10-K
     for the fiscal year ended December 31, 1995.)

(z)  $4,000,000,000  Revolving  Credit  Agreement,  dated as of April 30,  1997,
     among  the  registrant,   Bank  of  America   National  Trust  and  Savings
     Association,  as agent,  and the  several  financial  institutions  parties
     thereto.  (Incorporated  by  reference  to  Exhibit  10(a) of  registrant's
     Quarterly Report on Form 10-Q for the quarter ended March 31, 1997.)

(aa) Agreement,  dated as of November 9, 1997, among British  Telecommunications
     plc, MCI  Communications  Corporation and WorldCom,  Inc.  (Incorporated by
     reference to Exhibit 10 of registrant's Current Report on Form 8-K filed on
     November 12, 1997.)

12   Computation of Ratio of Earnings to Fixed Charges.

13   Certain portions of the registrant's  Annual Report to Stockholders for the
     year ended December 31, 1997 which are  incorporated by reference into this
     Annual Report on Form 10-K.

21   Significant Subsidiaries of MCI Communications Corporation.

23   Consent of Independent Accountants.

27(a) Financial Data Schedule - December 31, 1997.

  (b) Financial Data Schedule - December 31, 1996.

  (c) Financial Data Schedule - December 31, 1995.

99(a) Valuation and Qualifying Accounts (Schedule II).

(b)  Capitalization Schedule.

(c)  Accountant's Report on Financial Statement Schedule.



<PAGE>


PAGE 48


(b)    Reports on Form 8-K.

           (i)       Current  Report  on Form 8-K  filed on  November  12,  1997
                     reporting on Items 5 and 7.

           (ii)      Amendment  to Current  Report on Form 8-K filed on November
                     14, 1997 reporting on Item 7.

(c)    Exhibits.

        See Item 14(a)(3) of this Annual Report on Form 10-K.

(d)    Financial Statement Schedule.

        See Items 14(a)(2) and 14(a)(3) of this Annual Report on Form 10-K.




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<PAGE>


PAGE 49



                                   SIGNATURES

        Pursuant to the  requirements  of Section 13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                             MCI COMMUNICATIONS CORPORATION

                                  /s/ Bert C. Roberts, Jr.
Dated:  March 31, 1998       By:  --------------------------
                                      Bert C. Roberts, Jr.
                                      Chairman

        Pursuant to the  requirements  of the  Securities  Exchange Act of 1934,
this report has been signed below by the following  persons on March 31, 1998 on
behalf of the registrant and in the capacities indicated.

Signature                            Title


/s/ Gerald H. Taylor
----------------------------         Chief Executive Officer,
Gerald H. Taylor                     Director

/s/ Douglas L. Maine
-----------------------------        Principal Financial Officer
Douglas L. Maine

/s/ David M. Case
-----------------------------        Principal Accounting Officer
David M. Case

/s/ Bert C. Roberts, Jr.
-----------------------------        Director
Bert C. Roberts, Jr.

/s/ Clifford L. Alexander, Jr.
-----------------------------        Director
Clifford L. Alexander, Jr.


/s/ Judith Areen
------------------------------       Director
Judith Areen



<PAGE>


PAGE 50



/s/ Michael H. Bader
-----------------------------        Director
Michael H. Bader



-----------------------------        Director
Sir Peter L. Bonfield




-----------------------------        Director
Robert P. Brace


/s/ Richard M. Jones
-----------------------------        Director
Richard M. Jones


/s/ Gordon S. Macklin
-----------------------------        Director
Gordon S. Macklin



/s/ Richard B. Sayford
-----------------------------        Director
Richard B. Sayford


/s/ Judith Whittaker
-----------------------------        Director
Judith Whittaker


/s/ John R. Worthington
-----------------------------        Director
John R. Worthington


<PAGE>


PAGE 1


                                  Exhibit Index
                                 ---------------

Exhibit
  No.                          Description
------                         -----------

2    Agreement and Plan of Merger dated November 9, 1997, among WorldCom,  Inc.,
     MCI  Communications  Corporation and TC Investments Corp.  (Incorporated by
     reference to Exhibit 2 to Registrant's  Current Report on Form 8-K/A, filed
     November 14, 1997.)

3(a) Restated  Certificate of  Incorporation of MCI  Communications  Corporation
     filed on March 28,  1995.  (Incorporated  by  reference  to Exhibit 3(a) to
     registrant's  Annual Report on Form 10-K for the fiscal year ended December
     31, 1994.)

 (b) By-laws of registrant,  as amended.  (Incorporated  by reference to Exhibit
     3(ii)  to  registrant's  Registration  Statement  on  Form  S-3,  Reg.  No.
     33-57155.)

4(a) Indenture,  dated as of October 15, 1989,  between  registrant  and Bankers
     Trust Company.  (Incorporated  by reference to Exhibit 4(c) to registrant's
     Registration Statement on Form S-3, Reg. No. 33-31600.)

(b)  Indenture dated as of October 15, 1989 between registrant and Bankers Trust
     Company.  (Incorporated  by  reference  to  Exhibit  4(d)  to  registrant's
     Registration Statement on Form S-3, Reg. No. 33-31600.)

(c)  Indenture  dated as of October 15, 1989 between  registrant  and  Citibank,
     N.A.   (Incorporated   by  reference   to  Exhibit  4(e)  to   registrant's
     Registration Statement on Form S-3, Reg. No. 33-31600.)

(d)  Indenture  dated as of February 17, 1995 between  registrant  and Citibank,
     N.A.  (Incorporated  by reference to Exhibit 4 (d) to  registrant's  Annual
     Report on Form 10-K for the fiscal year ended December 31, 1994.)

(e)  Supplement No. 1, dated as of October 4, 1996, to the  Indenture,  dated as
     of February 17,  1995,  between MCI and  Citibank,  N.A.  (Incorporated  by
     reference to Exhibit 4(e) to  registrant's  Annual  Report on Form 10-K for
     the fiscal year ended December 31, 1996.)


<PAGE>


PAGE 2

(f)  Supplement No. 2, dated as of March 12, 1998, to the Indenture, dated as of
     February 17, 1995, between MCI and Citibank, N.A.

(g)  Form of Senior Fixed Rate Medium-Term  Note.  (Incorporated by reference to
     Exhibit 4(a) to  Registrant's  Current Report on Form 8-K, filed October 7,
     1996.)

(h)  Form of Senior Floating Rate Medium-Term  Note.  (Incorporated by reference
     to Exhibit 4(b) to  Registrant's  Current Report on Form 8-K, filed October
     7, 1996.)

(i)  Form  of  Subordinated  Fixed  Rate  Medium-Term  Note.   (Incorporated  by
     reference to Exhibit 4(g) to  registrant's  Registration  Statement on Form
     S-3, Reg. No. 33-31600.)

(j)  Form of  Subordinated  Floating Rate  Medium-Term  Note.  (Incorporated  by
     reference to Exhibit 4(i) to  registrant's  Registration  Statement on Form
     S-3, Reg. No. 33-31600.)

(k)  Form of 7-1/2% Senior Note due August 20, 2004.  (Incorporated by reference
     to Exhibit 4 of registrant's  Quarterly Report on Form 10-Q for the Quarter
     Ended June 30, 1992.)

(l)  Form of 7-1/8% Senior Note due January 20, 2000. (Incorporated by reference
     to Exhibit 1(b) of  registrant's  Current  Report on Form 8-K filed January
     19, 1993.)

(m)  Form of 8-1/4%  Senior  Debenture  due January 20, 2023.  (Incorporated  by
     reference to Exhibit 1(c) of registrant's  Current Report on Form 8-K filed
     January 19, 1993.)

(n)  Form of  7-3/4%  Senior  Debenture  due March 15,  2024.  (Incorporated  by
     reference to Exhibit 4(a) of registrant's  Current Report on Form 8-K filed
     March 12, 1993.)

(o)  Form of 6-1/4% Senior Note due March 23, 1999.  (Incorporated  by reference
     to Exhibit 4(a) of registrant's  Current Report on Form 8-K filed March 15,
     1994.)

(p)  Form of  7-3/4%  Senior  Debenture  due March 23,  2025.  (Incorporated  by
     reference to Exhibit 4(b) of registrant's  Current Report on Form 8-K filed
     March 15, 1994.)

(q)  Form of 7-1/8%  Debenture due June 15, 2027.  (Incorporated by reference to
     Exhibit  4(a) of  registrant's  Current  Report on Form 8-K filed  June 21,
     1996.)

<PAGE>


PAGE 3


(r)  Form of 6.95% Senior Note due August 15, 2006.  (Incorporated  by reference
     to Exhibit 4(a) of registrant's  Current Report on Form 8-K filed August 8,
     1996.)

(s)  Form of Senior  Floating  Rate Note due March 16,  1999.  (Incorporated  by
     reference to Exhibit 4(c) of registrant's  Current Report on Form 8-K filed
     March 15, 1994.)

(t)  Rights  Agreement,  dated as of September 30, 1994,  between the registrant
     and Mellon  Bank,  N.A.  (Incorporated  by  reference  to  Exhibit  4(a) to
     registrant's Current Report on Form 8-K filed October 4, 1994.)

(u)  Amendment No. 1, dated as of November 3, 1996, to Rights  Agreement,  dated
     as of September  30, 1994,  between the  registrant  and Mellon Bank,  N.A.
     (Incorporated  by reference to Exhibit 2 to  registrant's  Form 8-A/A filed
     November 20, 1996.)

(v)  Amendment No. 2, dated as of August 20, 1997, to Rights Agreement, dated as
     of September 30, 1994 and amended,  between the Company and Morgan Guaranty
     Trust Company of New York, as Rights Agent.  (Incorporated  by reference to
     Exhibit 4 to registrant's Form 8-A/A filed November 20, 1997.)

(w)  Amendment No. 3, dated as of November 9, 1997, to Rights  Agreement,  dated
     as of  September  30,  1994 and  amended,  between  the  Company and Morgan
     Guaranty  Trust  Company of New York,  as Rights  Agent.  (Incorporated  by
     reference to Exhibit 5 to registrant's Form 8-A/A filed November 20, 1997.)

(x)  Junior  Subordinated  Indenture  between  registrant and  Wilmington  Trust
     Company,  as Debenture Trustee.  (Incorporated by reference to Exhibit 4.01
     of registrant's  Registration  Statement on Form S-3, Registration No. 333-
     02593.)

(y)  Form  of  Amended  and  Restated  Trust  Agreement  among  registrant,   as
     Depositor,  Wilmington  Trust  Company,  as Property  Trustee and  Delaware
     Trustee,  and the Administrative  Trustees named therein.  (Incorporated by
     reference to Exhibit 4.10 of  registrant's  Registration  Statement on Form
     S-3, Registration No. 333-02593.)



<PAGE>


PAGE 4


(z)  Form  of  Guarantee  Agreement  between  registrant,   as  Guarantor,   and
     Wilmington Trust Company, as Trustee. (Incorporated by reference to Exhibit
     4.12 of registrant's Registration Statement on Form S-3, Registration No.
     333- 02593.)

(aa) Form of  Supplemental  Indenture  between  registrant and Wilmington  Trust
     Company,  as Debenture Trustee.  (Incorporated by reference to Exhibit 4.13
     of registrant's  Registration  Statement on Form S-3, Registration No. 333-
     02593.)

10(a)1979  Stock   Option  Plan  of   registrant,   as  amended  and   restated.
     (Incorporated  by reference to Exhibit 10(a) to registrant's  Annual Report
     on Form 10-K for the fiscal year ended December 31, 1988.)

(b)  Supplemental   Retirement   Plan  for   Employees  of  MCI   Communications
     Corporation and  Subsidiaries,  as amended.  (Incorporated  by reference to
     Exhibit  10(b) to  registrant's  Annual  Report on Form 10-K for the fiscal
     year ended December 31, 1993.)

(c)  Description  of  Executive  Life  Insurance  Plan  for  MCI  Communications
     Corporation and  Subsidiaries.  (Incorporated by reference to "Remuneration
     of Officers" in registrant's Proxy Statement for its 1992 Annual Meeting of
     Stockholders.)

(d)  MCI  Communications  Corporation  Executive  Incentive  Compensation  Plan.
     (Incorporated  by reference to Exhibit 10(e) to registrant's  Annual Report
     on Form 10-K for the fiscal year ended December 31, 1995.)

(e)  Amendment  No.  1 to MCI  Communications  Corporation  Executive  Incentive
     Compensation   Plan.   (Incorporated  by  reference  to  Exhibit  10(e)  to
     registrant's  Annual Report on Form 10-K for the fiscal year ended December
     31, 1996.)

(f)  Form of Director  Indemnification  Agreement.(Incorporated  by reference to
     Appendix B to  registrant's  Proxy Statement for its 1987 Annual Meeting of
     Stockholders.)

(g)  1988 Directors' Stock Option Plan of registrant. (Incorporated by reference
     to Exhibit D to registrant's Proxy Statement for its 1989 Annual Meeting of
     Stockholders.)


<PAGE>


PAGE 5

(h)  Amendment  No. 1 to the 1988  Directors'  Stock Option Plan of  registrant.
     (Incorporated  by reference to Appendix D to  registrant's  Proxy Statement
     for its 1996 Annual Meeting of Stockholders.)

(i)  Amendment  No.  2 to 1988  Directors'  Stock  Option  Plan  of  registrant.
     (Incorporated  by reference to Exhibit 10(i) to registrant's  Annual Report
     on Form 10-K for the fiscal year ended December 31, 1996.)

(j)  Amendment  No.  3 to 1988  Directors'  Stock  Option  Plan  of  registrant.
     (Incorporated  by reference to Exhibit 10(j) to registrant's  Annual Report
     on Form 10-K for the fiscal year ended December 31, 1996.)

(k)  Stock Option Plan of registrant. (Incorporated by reference to Exhibit C to
     registrant's Proxy Statement for its 1989 Annual Meeting of Stockholders.)

(l)  Amendment No. 1 to the Stock Option Plan of  registrant.  (Incorporated  by
     reference to Exhibit 10(l) to  registrant's  Annual Report on Form 10-K for
     the fiscal year ended December 31, 1996.)

(m)  Amendment No. 2 to the Stock Option Plan of  registrant.  (Incorporated  by
     reference to Appendix B to registrant's Proxy Statement for its 1996 Annual
     Meeting of Stockholders.)

(n)  Amendment No. 3 to the Stock Option Plan of  registrant.  (Incorporated  by
     reference to Exhibit 10(n) to  registrant's  Annual Report on Form 10-K for
     the fiscal year ended December 31, 1996.)

(o)  Amendment No. 4 to the Stock Option Plan of  registrant.  (Incorporated  by
     reference to Exhibit 10(o) to  registrant's  Annual Report on Form 10-K for
     the fiscal year ended December 31, 1996.)

(p)  Amendment No. 5 to the Stock Option Plan of  registrant.  (Incorporated  by
     reference to Exhibit 10(p) to  registrant's  Annual Report on Form 10-K for
     the fiscal year ended December 31, 1996.)

(q)  Board of Directors Deferred Compensation Plan of Registrant.  (Incorporated
     by reference to Exhibit  10(i) to  registrant's  Annual Report on Form 10-K
     for the fiscal year ended December 31, 1994.)

<PAGE>


PAGE 6

(r)  The  Senior   Executive   Incentive   Compensation   Plan  of   registrant.
     (Incorporated  by reference to Appendix A to  registrant's  Proxy Statement
     for its 1996 Annual Meeting of Stockholders.)

(s)  Amendment  No. 1 to the Senior  Executive  Incentive  Compensation  Plan of
     registrant.  (Incorporated  by reference to Exhibit  10(s) to  registrant's
     Annual Report on Form 10-K for the fiscal year ended December 31, 1996.)

(t)  Executive Severance Policy.  (Incorporated by reference to Exhibit 10(a) to
     Registrant's  Quarterly Report on Form 10-Q for the quarter ended September
     30, 1996.)

(u)  Form of employment agreement, effective as of November 2, 1996, between MCI
     and  certain  executive  officers of MCI.  (Incorporated  by  reference  to
     Exhibit  10(u) to  registrant's  Annual  Report on Form 10-K for the fiscal
     year ended December 31, 1996.)

(v)  Amended  and  Restated  Investment  Agreement  dated as of January 31, 1994
     between MCI Communications  Corporation and British Telecommunications plc.
     (Incorporated by reference to Appendix I of registrant's  Notice of Special
     Meeting of Stockholders and Proxy Statement dated February 4, 1994.)

(w)  Modified  Joint  Venture  Agreement  dated as of July 1, 1994  between  MCI
     Communications  Corporation  and  British  Telecommunications  plc  and MCI
     Ventures   Corporation   and   Moorgate   (Twelve)   Limited   and  Concert
     Communications  Company.  (Incorporated  by reference  to Exhibit  10(l) to
     registrant's  Annual Report on Form 10-K for the fiscal year ended December
     31, 1994.)

(x)  Warrant Purchase Agreement by and between The News Corporation  Limited and
     MCI Communications Corporation dated as of August 2, 1995. (Incorporated by
     reference to Exhibit 10(p) to  registrant's  Annual Report on Form 10-K for
     the fiscal year ended December 31, 1995.)

(y)  Preferred Stock Purchase Agreement by and among MCI, News Triangle Finance,
     Inc. and News T Investments, Inc. dated as of August 2, 1995. (Incorporated
     by reference to Exhibit  10(q) to  registrant's  Annual Report on Form 10-K
     for the fiscal year ended December 31, 1995.)

<PAGE>


PAGE 7

(z)  $4,000,000,000  Revolving  Credit  Agreement,  dated as of April 30,  1997,
     among  the  registrant,   Bank  of  America   National  Trust  and  Savings
     Association,  as agent,  and the  several  financial  institutions  parties
     thereto.  (Incorporated  by  reference  to  Exhibit  10(a) of  registrant's
     Quarterly Report on Form 10-Q for the quarter ended March 31, 1997.)

(aa) Agreement,  dated as of November 9, 1997, among British  Telecommunications
     plc, MCI  Communications  Corporation and WorldCom,  Inc.  (Incorporated by
     reference to Exhibit 10 of registrant's Current Report on Form 8-K filed on
     November 12, 1997.)

12   Computation of Ratio of Earnings to Fixed Charges.

13   Certain portions of the registrant's  Annual Report to Stockholders for the
     year ended December 31, 1997 which are  incorporated by reference into this
     Annual Report on Form 10-K.

21   Significant Subsidiaries of MCI Communications Corporation.

23   Consent of Independent Accountants.

27(a) Financial Data Schedule - December 31, 1997.

  (b) Financial Data Schedule - December 31, 1996.

  (c) Financial Data Schedule - December 31, 1995.

99(a) Valuation and Qualifying Accounts (Schedule II).

(b)  Capitalization Schedule.

(c)  Accountant's Report on Financial Statement Schedule.