Bell Atlantic Starts 1998 With Solid First Quarter
Adjusted Net Income Rises 10.7% On Strong Business Volumes, Global Wireless Group Registers 33% Subscriber Growth
April 23, 1998
NEW YORK -- Bell Atlantic (NYSE:BEL) today announced adjusted first quarter earnings per share of $1.32, 10.0 percent higher than first quarter 1997 EPS of $1.20. All EPS figures are on a diluted basis. Adjusted net income rose 10.7 percent to
$1.0 billion from $941.8 million in the first quarter of 1997.
First quarter 1998 adjusted EPS excludes $.19 per share for charges related to merger integration and an enhanced pension offer. Reported EPS for the quarter was $1.13 compared to $.89 in first quarter 1997. Reported net income was $890.9 million compare
d to $698.2 million in first quarter 1997.
Total proportionate revenues, which include Bell Atlantic's share of its unconsolidated wireless and international wireline businesses, increased 6.0 percent. Telecom Group revenues increased 2.4 percent, Global Wireless revenues increased 21.1 percent
and International Telecom revenues increased 57.2 percent.
"We delivered strong operating results across all three key units of our business in a period of change and transition to a less regulated and faster-growing communications marketplace," said Bell Atlantic Chairman and CEO Raymond W. Smith.
"Our Telecom Group results reflected the impacts of approximately $150 million in mandated price reductions during the quarter and $35-$40 million in costs related to this winter's severe ice storms, as well as competitive effects and the startup costs o
f creating platforms and capabilities for new services, particularly in long distance and data markets.
"The performance of our Global Wireless unit was exemplary. Our domestic cellular and PCS businesses demonstrated how to thrive in fully competitive markets - with discipline and value to customers - and our international wireless investments broke the
one million-customer mark and continued their growth in revenues and profitability. Global Wireless has come into its own as a source of sustainable growth for the corporation.
"Our International Telecom group continues to strengthen its portfolio, with key contributions in the quarter from Telecom Corporation of New Zealand and Cable & Wireless Communications. By merging NYNEX CableComms, a primarily consumer-oriented operatio
n, into CWC, we have taken a significant ownership position in a full-service provider with expanded reach and growth prospects in an attractive market.
"At Bell Atlantic," Smith said, "we are forging the kind of corporation required to grow and succeed in the new communications industry: a market leader with diversified sources of earnings growth, strong and steady across-the-board operating performanc
e, and the readiness to move into new opportunities."
Ivan Seidenberg, Bell Atlantic vice chairman, president and COO, said, "We will continue this transformation through the rest of this year as we drive up our top-line growth, mine our merger synergies, develop new platforms and capabilities, and continu
e to break through on policy issues.
"Our increased scale and scope has already produced significant capital savings - more than $150 million on an annual basis -- in contracts for data networking equipment. To capture revenue synergies, we used best practices to design and execute what is t
urning out to be a very successful sales campaign for value-added services, and we should begin to see the top-line benefits starting next quarter. We also are on track to transform our cost structure and meet our 1998 target of $450 million in expense s
"Our recently announced Data Solutions Group will enable us to organize our data assets and capabilities and become a compelling choice for fully integrated local, national and global solutions for business customers.
"And as for long distance, we have broken the regulatory logjam. The recent endorsement by the chairman of the New York State Public Service Commission should go a long way toward persuading the FCC that our application to offer long distance in New York
should be approved.
"Not only will approval begin to open up the $20 billion market in our region, it will be a catalyst for growth across the board - we finally will be allowed to offer one-stop shopping for toll and long distance like our competitors, which will strengthen
our ability to retain customers and win new ones. Long distance also will give us the ability to better serve high-end customers, become a full-service data provider, and serve the high percentage of international traffic to and from our region.
"I'm confident that we'll stay on course and meet both our financial and our strategic targets, and come through 1998 ready to turn our 'first-mile' local assets -- the best in the business, in the world's best marketplace -- into national and global oppo
Domestic Telecommunications Highlights
Telecom Group revenues grew 2.4 percent compared to first quarter 1997, as continued strong business volumes helped offset the effects of mandated rate reductions.
Strong demand growth was reflected in the following:
- Domestic access lines in service grew 4.3 percent over first quarter 1997, to approximately 40.4 million. As of this quarter, and for prior periods, Bell Atlantic includes Primary Rate ISDN (Integrated Services Digital Network) channels in its access
line totals to recognize the growing transition from lines to bandwidth.
- Bell Atlantic ended the quarter with more than 450,000 basic-rate ISDN lines in service, up 29.7 percent from first quarter 1997, and more than 550,000 Primary Rate ISDN channels in service, more than double the first quarter 1997 total.
- Access minutes of use grew 8.5 percent.
In the residential market:
- Revenues from value-added call management services such as Caller ID, Call Waiting and Home Voice Mail rose 14.1 percent over the same period last year. The number of Caller ID subscribers rose to 5.5 million, with revenues increasing 43.0 percent.
In business markets:
- The number of Centrex lines increased 8.8 percent year-over-year to 4.6 million.
- The number of "DS0" circuits in service (digital, high-bandwidth and packet-switched services as measured in 64-kilobit voice-grade equivalents) increased more than 43 percent over first quarter 1997.
- Revenues from high-bandwidth switched and special access services rose 28.1 percent over first quarter 1997 levels and approached $500 million.
- The Data Solutions Group's network integration line of business, known as BANI, had an exceptionally strong first quarter, growing revenues 47 percent.
In wholesale markets:
- Bell Atlantic ended the quarter providing approximately 300,000 resold access lines and nearly 50,000 unbundled loops to other carriers. The majority of wholesale sales took place in New York, where Bell Atlantic-New York received the endorsement of
the chairman of the Public Service Commission of conditions for the PSC's endorsement of the company's entry into long distance.
Adjusted network operating expenses for the quarter totaled $5.0 billion, 2.6 percent higher than in 1997. Expenses included costs incurred to restore network facilities and service after January's severe ice storms in the Northeast, as well as costs f
or compliance with the Telecommunications Act 'checklist,' including local number portability, and investments in growth opportunities.
Global Wireless Highlights
Global Wireless ended the quarter with a total of 6.7 million proportionate customers, an increase of nearly 1.7 million, or 33 percent, over the first quarter of 1997. Proportionate international subscribers passed the million-customer milestone in the
quarter, with the number increasing by 638,000, or 167 percent, over first quarter 1997. Net international customer additions in the quarter of 211,000 were triple the number in the prior-year period.
Total proportionate revenues grew to $977 million, 21.1 percent higher than first quarter 1997, with international ventures and PrimeCo Personal Communications, Bell Atlantic's domestic PCS partnership, contributing more than 50 percent of that growth. P
roportionate operating income for the portfolio continued to improve, increasing 68 percent compared to first quarter 1997.
In domestic markets, Bell Atlantic Mobile's focus on profitable growth in the face of intensifying competition paid off in subscriber growth of more than 18 percent and revenue growth of nearly 12 percent. BAM's aggressive redefinition of digital pricin
g in March, which quickly began to shift customers from analog to digital networks, helped fuel this growth. At the same time, BAM improved its cash flow margin by five percentage points over the same period last year, to 42 percent, resulting in a 19 pe
rcent increase in operating income.
PrimeCo Personal Communications added more than 121,000 customers, 56 percent more additions than in first quarter 1997, and passed the half-million mark during the quarter.
Domestic highlights include:
- BAM ended the quarter with 5.5 million customers, with net customer additions of 127,000 in highly competitive markets. Churn improved slightly on a larger customer base, to 1.83 percent from 1.84 percent in first quarter 1997.
- BAM added 96,000 digital customers in the quarter, more than half of whom signed up after the new digital pricing was introduced on March 1. BAM now has more than 250,000 digital subscribers, or 4.7 percent of its total.
- BAM expanded margin and improved profitability by decreasing cash expense per subscriber nearly 15 percent, to $24.60, while revenue per subscriber decreased 6.6 percent, to $48.40. BAM total revenue grew more than $80 million from the year-ago perio
- Proportionate PrimeCo revenues for the quarter grew to $49 million, more than quadruple the revenues of first quarter 1997, with average monthly revenue per subscriber of $60.
- PrimeCo's network now covers over 36 million POPs and 28 cities, with penetration now 1.4 percent of covered POPs.
International highlights include:
- Omnitel Pronto Italia, Bell Atlantic's Italian wireless consortium, continued its rapid subscriber growth, exceeding the 3 million customer mark in March. Bell Atlantic announced in April that it will increase its stake in Omnitel from 17.4 to 19.7 pe
- Grupo Iusacell in Mexico increased subscribers more than 90 percent over the year-ago period. During the first quarter, Iusacell also began deployment of the first next-generation digital CDMA service in Latin America.
- EuroTel Bratislava, Bell Atlantic's wireless investment in the Slovak Republic, had a record quarter for additions, increasing its subscriber base more than 64 percent over first quarter 1997 to nearly 150,000.
- EuroTel Praha in the Czech Republic also had a robust quarter, with net additions of more than 37,000, bringing the number of customers to 392,000, 91 percent more than in first quarter 1997.
- STET Hellas in Greece continued its rapid growth, increasing subscribers 85 percent from the same period a year ago.
International Telecommunications Highlights
Bell Atlantic's International Telecommunications portfolio of overseas wireline investments ended the period with more than 900,000 access lines in service on a proportionate basis, and showed proportionate revenue growth of 57.2 percent. International T
elecom made a substantial contribution to equity income growth in the quarter.
Bell Atlantic benefited from the restructuring of its U.K. investment with the formation in April 1997 of Cable & Wireless Communications (CWC) from Mercury Communications and three cable television companies, including NYNEX CableComms. Bell Atlantic own
s 18.5 percent of CWC. Since April 1997, CWC has made significant progress toward integrating operations and driving strong revenue and subscriber growth in all lines of business, and has seen its London stock price hit an all-time high. CWC will announc
e results on May 11 for its fiscal year ending March 31, 1998.
Telecom Corporation of New Zealand (TCNZ) enjoyed solid growth in volumes and earnings for the nine months ended Dec. 31, 1997. During the first quarter, Bell Atlantic completed the sale of $2.4 billion in medium-term notes exchangeable for TCNZ shares.
Bell Atlantic used the proceeds to pay down short-term debt while retaining its 24.95 percent ownership of TCNZ. TCNZ will announce results on May 19 (EST) for its fiscal year ending March 31, 1998.
Bell Atlantic - formed through the merger of Bell Atlantic and NYNEX - is at the forefront of the new communications and information industry. With more than 41 million telephone access lines and 6.7 million wireless customers worldwide, Bell Atlantic c
ompanies are premier providers of advanced wireline voice and data services, market leaders in wireless services and the world's largest publishers of directory information. Bell Atlantic companies are also among the world's largest investors in high-gro
wth global communications markets, with operations and investments in 22 countries.
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NOTE: This press release contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. For those statements, we claim the protection of the safe harbor for forward-looking stateme
nts contained in the Private Securities Litigation Reform Act of 1995. Discussion of factors that may affect future results is contained in our recent filings with the Securities and Exchange Commission.