GTE reports 10 percent earnings per share growth in the second quarter

STAMFORD, Conn. -- GTE Corp. today announced that earnings per share increased 10 percent in the second quarter. Consolidated net income for the second quarter of 1996 was $642 million, or 66 cents per share, compared with $581 million, or 60 cents per share, in the second quarter last year.

"Building on the excellent results in our first quarter, GTE's top-line revenue growth of 7 percent in the second quarter demonstrates the excellent momentum now driving the company forward," said GTE Chairman and Chief Executive Officer Charles R. Lee.

"The strong performances of our core wireline and wireless businesses, both nationally and internationally, reflect the underlying strength of the high-growth suburban and rural markets we serve as well as our ongoing industry-leading productivity improvements.

"More importantly, this momentum is being propelled by the array of new products and services we are offering as the result of our unique position in the industry. GTE continues to move forward to capitalize on the exciting opportunities available following the passage of the Telecommunications Act of 1996," Lee said.

GTE is Adding 6,000 Long-Distance Customers a Day

"We are pleased with our customers' acceptance of GTE's long-distance offering, which is now growing at a rate of 6,000 customers a day, with more than a quarter of a million customers currently using GTE Long Distance in 16 states. By the end of the year, we plan to offer this service throughout the 28 states where we provide local service," Lee continued.

"In addition, we have reached an agreement to offer Internet access services nationwide -- the first local telephone company to do so, and customers in Clearwater, Fla., are enjoying the video services introduced there in June. Customers want the simplicity of getting all their telecommunications services from a single provider; these initiatives demonstrate that GTE is moving quickly to fulfill their needs.

"Internationally, we see progress in our existing operations, as well as the development of new opportunities in both Asia and Latin America," said Lee.

Revenues and Operating Income Up 7%, and 8%, Respectively

Consolidated revenues and sales increased a healthy 7 percent to $5.29 billion in the quarter, compared to $4.93 billion in the year-ago quarter. This is the largest quarterly increase in over four years. The increase is driven by the growth in network usage, the number of cellular customers served, and new and enhanced service offerings.

Operating income in the second quarter increased over $100 million to $1.34 billion, representing an 8 percent improvement from the $1.24 billion reported in the year-ago quarter. This reflects the increased revenue and favorable effects of ongoing cost-reduction programs. Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA), grew at a rate of 8 percent over the year-ago quarter, reaching $2.26 billion.

Six-Month Results

For the first half of 1996, net income was $1.26 billion, or $1.29 per share, compared with $1.12 billion, or $1.16 per share, for the same period in 1995. Excluding the gains from the sale of the non-strategic telephone properties sold in early 1996, earnings per share for the first half increased a solid 10 percent over last year. Consolidated revenues and sales for the first six months of 1996 increased 7 percent to $10.24 billion, while operating income increased 8 percent to $2.59 billion.

Domestic Network Services Records Another Strong Quarter with Minutes of Use Up 10%, Access Lines Up 7% and Worldwide Cellular Customers Up 26%

Revenues from Domestic Network Services, which includes GTE's wireline and wireless operations, increased 7 percent to $3.43 billion for the second quarter, compared with $3.21 billion a year ago, reflecting strong increases in wireline-unit volumes, continued growth in cellular customers and the continued expansion of new and non-traditional telecommunications services, which grew over 25 percent from the year-ago quarter.

Minutes of use on GTE's domestic local-exchange network for long-distance calling grew at an annual rate of 10 percent, while total access lines increased 7 percent over last year, with about half of the residential growth coming from second lines to the home.

Access lines per employee, a key indicator of productivity, increased from 264 a year ago to 305, representing an improvement of 16 percent.

Domestic cellular-service revenues totaled $587 million in the second quarter, representing an increase of 18 percent over the same period last year, as customer growth continued at a pace of 21 percent. GTE added 149,000 new domestic cellular customers in the quarter, an increase of 21 percent over the same period last year, bringing the total U.S. customers served to 3,243,000. Combining the domestic growth with the dramatic 62% growth in international cellular subscribers, the total number of cellular customers increased 26 percent.

"The pace of our domestic cellular customer growth reflects the impact of targeted marketing programs implemented late last year," Lee said. "By focusing on the acquisition and retention of higher-value customers, we experienced a 15 percent improvement in churn rates during the first six months of 1996, as well as significantly lower bad debt levels and stronger revenues per customer per month.

"These numbers indicate that our targeted marketing programs are producing the positive results that we had anticipated," said Lee.

About GTE

GTE, with annual revenues of $20 billion in 1995, is one of the largest publicly held telecommunications companies in the world. It also is the largest U.S.-based local telephone company and a leading cellular-service provider -- with wireline and wireless operations in markets encompassing about a third of the country's population. Outside the United States, where GTE has operated for more than 40 years, the company serves over 6 million wireline and wireless customers. GTE is also a leader in government and defense communications systems and equipment, aircraft-passenger telecommunications, directories and telecommunication-based information services and systems.

1996 2nd Quarter Report