GTE Reports 11% Operational Earnings Per Share Growth in FirstQuarter; Strong Volume Growth Yields 7% Revenue Growth

STAMFORD, Conn. -- GTE Corp. today announced that operational earnings per shareincreased 11 percent in the first quarter of 1997. Consolidated net income for the quarter was $665 million, or 69 cents per share, compared with $608 million, or 62 cents per share, in the first quarter of 1996, excluding gains on sales of non-strategic telephone properties of $8 million or 1 cent per share.

"These excellent results reflect strong volume increases and underscore the strength of our core operations -- both domestic and international," said GTE Chairman and Chief Executive Officer Charles R. Lee "It's a real accomplishment to deliver double-digit earnings growth while, at the same time, making strategic investments required to succeed in our industry's new environment of competition and opportunity. During the quarter, we continued to invest in rolling out new service offerings, such as long distance, video and Internet access, as well as the start-up of our wireless digital PCS operations. We believe GTE is extremely well-positioned for the future," Lee added.

"In addition to quality service at a competitive price, customers want a bundled array of telecommunications services, with a single bill and single point of contact. As the first major local exchange carrier to deliver a full array of bundled services and true one-stop shopping, GTE is in a unique position to satisfy these needs," Lee noted.

Consolidated revenues and sales increased 7 percent to $5.28 billion in the quarter, compared to $4.95 billion in the year-ago quarter. The increase is driven primarily by the continued growth of core domestic and international wireline and wireless services:

• Domestic access lines grew by 1.5 million lines, or 8%, including 4.8% growth in switched access lines;
• Domestic access minutes of use grew by 14%, to 19.8 billion minutes;
• Domestic cellular customers grew 30%, with 260 thousand new customers in the quarter;
• Sales of new and expanded services grew 58%, to $385 million, including voice messaging, data services, long distance, Caller ID and Internet access;
• International network revenue reached $537 million, up 10%, including over 40% growth in cellular customers within Canada and the Dominican Republic.

Revenues from other services and sales grew 13 percent to $990 million, due to higher worldwide volumes of telecommunications equipment, systems and solutions, offset, in part, by lower revenues from Directory services, resulting from the timing of yellow page directory publications.

Domestic and International Milestones Reached In The Quarter

"We've had terrific success in acquiring new customers in intensely competitive businesses," Lee said. "Just consider the customer milestones surpassed this quarter:

• 1 million long-distance customers;
• 100,000 Internet access customers; and
• 4 million domestic cellular customers, which we're announcing today.

"These successes, and the well-received launch of our wireless digital PCS offering in the Cincinnati area, illustrate a key point: GTE can compete and win -- all these customers had choices of service providers, and they chose GTE," Lee said.

"Internationally, we continue to make strategic investments and explore new opportunities for growth in Asia, Latin America and Europe," Lee added.

"In China, I'm pleased with the progress we're making in developing the only nationwide paging system of its kind," Lee said. "Service was recently initiated in Shanghai, which complements the five Pearl River Delta cities that were operational in the fourth quarter of 1996. In addition, GTE's wholly owned telephone company in the Dominican Republic, CODETEL, recently announced plans to co-develop the first Internet network access point to serve Latin America," Lee added.

Domestic Network Services Revenues Spurred by 8% Access Line Growth, 14% Growth in Minutes of Use, and 30% Growth in Cellular Customers

Revenues from Domestic Network Services, which include GTE's wireline and wireless operations, increased 6 percent to $3.57 billion for the first quarter, compared with $3.37 billion in the year-ago quarter. These results were achieved through the strong growth in wireline and wireless unit volumes, as well as the new and expanded service offerings. Revenues for data networks, including ISDN and frame relay, grew by 86 percent over the prior year, while revenues from such consumer conveniences as Caller ID, Call Waiting and paging services grew 33 percent. Second lines to the home, which now total over 1.7 million lines, grew by 24 percent. Access lines per employee, a key indicator of productivity, increased to 327, representing a 10 percent improvement, from a year ago.

"Wireless results were excellent," said Lee. "The 30 percent growth in customers places us among the industry leaders, and reflects the success of new promotions and targeted marketing programs that enabled the winning of new customers and the retention of our high-value customer base."

During the quarter, GTE added 260,000 new domestic cellular customers, more than triple the 83,000 customers added during the same quarter in 1996. Domestic cellular-service revenues totaled $617 million in the quarter, an 11 percent increase over the prior year. At the end of March 1997, GTE had 4,009,000 domestic cellular customers, an increase of over 900,000, or 30 percent, from the prior year. For the quarter, revenues per subscriber averaged $53, compared with $61 for the same period in 1996, reflecting the impact of new promotions. Since the first quarter of 1996, GTE's customer churn rate has been reduced by 20 percent.

Operating Income Grows 8% to $1.3 Billion

During the first quarter, operating income increased to $1.35 billion representing an 8 percent increase over the $1.25 billion reported a year ago. This increase is primarily the result of the continued growth in GTE's core wireline and wireless revenues and the favorable impact of ongoing operating cost reduction programs. The revenue growth and improved cost position were offset, in part, by higher selling and marketing expenses associated with the significant growth in wireless and long-distance customers, the continued expansion of Internet access and video activities and the launch of PCS services in the Cincinnati area.

About GTE

With revenues of more than $21 billion in 1996, GTE is one of the largest publicly held telecommunications companies in the world. In the United States, GTE offers local and wireless service in 29 states and long-distance service in all 50 states. GTE was the first among its peers to offer "one-stop shopping" for local, long-distance and Internet access services. Outside the United States, where GTE has operated for more than 40 years, the company serves over 6.5 million customers. GTE is also a leader in government and defense communications systems and equipment, directories and telecommunications-based information services, and aircraft-passenger telecommunications.

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Additional information about GTE can be found on the INTERNET at http://www.gte.com.