Bell Atlantic Posts Double-Digit Earnings Growth in First Quarter 1999
Telecom, Data, Wireless Volumes Drive 10.6% Adjusted EPS Increase
April 22, 1999
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NEW YORK -- Bell Atlantic (NYSE:BEL) today announced adjusted first quarter earnings per diluted share of 73 cents, an increase of 10.6 percent over 66 cents per share in first quarter 1998. First-quarter adjusted net income available to common shareowners rose 10.5 percent to $1.2 billion from $1.0 billion in first quarter 1998.
Consolidated revenues increased 4.1 percent to $8.0 billion compared to first quarter 1998. Including Bell Atlantic's share of revenues from its unconsolidated wireless investments, quarterly revenues rose 6.2 percent to $8.3 billion.
Adjustments and reported results are described below.
"Our first quarter results are a solid start toward our 1999 goal of delivering a fifth consecutive year of double-digit earnings growth while continuing our aggressive investment in the new businesses that will transform our growth profile," said Bell Atlantic Chairman and CEO Ivan Seidenberg.
"Demand for basic telephone services continues to be robust at the same time that demand for data services, as well as value-added voice services, is exploding. Data and data-related sales increased in all markets, and we sold more than 11 million new value-added features through our 'Save Like Wild' campaign -- some 2.5 million more than in first quarter 1998. We also introduced several new services, such as Business Link volume-discount calling packages for small businesses and National 411 directory assistance. We'll look for the marketing momentum we built in this quarter to carry over and strengthen top-line Domestic Telecom growth throughout 1999.
"Our Global Wireless Group continues to soar. The economies of digital wireless are transforming the industry, and Bell Atlantic Mobile's SingleRatesm price plans are advancing Bell Atlantic as a national wireless provider. In fact, customers worldwide are recognizing the superior quality and value of the digital services provided not only by Bell Atlantic Mobile, but by PrimeCo Personal Communications, Omnitel Pronto Italia and our other international investments as well.
"At the same time, we are on track with our major strategic initiatives. We're taking the final steps at the state level before we file our New York long distance application with the Federal Communications Commission, and we look forward to rounding out our product line with long distance.
"We have accelerated our rollout of ADSL (Asymmetric Digital Subscriber Line) technology to pass some 8 million households throughout our region by the end of this year and 16 million by the end of next year. Users of our ADSL service, Infospeed DSLsm , are extremely enthusiastic about its speed and convenience, and we will expand its availability throughout the New York and Boston markets shortly. We're also looking forward to the summer, when America Online will start packaging Infospeed as a premium upgrade for AOL members in our region.
"And shareowners have begun voting on our merger with GTE. Bell Atlantic and GTE are a great strategic fit, and our combination will create a global player with assets, capabilities and products ready to meet the full range of customer needs."
Reported results for the quarter reflect charges totaling one cent per share for transition costs related to the Bell Atlantic-NYNEX merger. Reported net income available to common shareowners was $1.1 billion, or 72 cents per share, compared to reported first quarter 1998 net income available to common shareowners of $891 million, or 56 cents per share. Reported results for first quarter 1998 reflect charges totaling 10 cents per share related to merger integration and an enhanced pension offer.
In keeping with new Financial Accounting Standards Board requirements for segment reporting, Bell Atlantic's financial statements now provide information about each of its four operating segments: Domestic Telecom, Directory, Global Wireless and Other Businesses. Highlights of the Domestic Telecom and Global Wireless segments, and related adjusted and proportionate information, are discussed below.
Strong demand for communications services, particularly data and value- added services, continued in the first quarter, with the number of access lines in service growing 4.0 percent to 42.1 million, and the number of business voice-grade equivalents (access lines plus data circuits) increasing 20.4 percent to 33.5 million. Total voice grade equivalents rose 12.2 percent to nearly 60 million. Access minutes of use rose 7.0 percent.
Domestic Telecom revenue increased 2.8 percent over first quarter 1998, with more than 75 percent of the growth coming from sales of data services. Data revenues for the quarter, including those from high- bandwidth packet-switched and special access services and Bell Atlantic's network integration business, totaled $659 million, up nearly 27 percent from first quarter 1998.
The demand for digital connectivity continued to grow in all markets. In the enterprise and general business markets:
- "DS0" circuits in service (digital, high-bandwidth and packet-switched services as measured in 64-kilobit voice-grade equivalents) increased 35.1 percent in the first quarter compared to first quarter 1998.
- Bell Atlantic ended the quarter with 529,000 basic rate Integrated Services Digital Network (ISDN) lines in service, up 14.3 percent from first quarter 1998, and the number of primary rate ISDN channels in service increased 58.7 percent to 884,000.
In consumer markets:
- Bell Atlantic continued its aggressive deployment of Infospeed DSL, the company's new high-speed service for Internet access. Infospeed DSL is now available in the Washington, D.C., Pittsburgh and Philadelphia metropolitan areas and the Hudson River communities of New Jersey, and deployment has begun in the Boston metropolitan area. A launch in New York City and expansion throughout the Boston area as well as other present markets are planned for this spring.
- During the quarter, Bell Atlantic and America Online (AOL) announced a strategic ADSL alliance. The multi-year agreement, the first of its kind in the industry, represents the first major purchase of ADSL services, which AOL will offer as a premium upgrade to its customers in Bell Atlantic territory.
- In February, Bell Atlantic.net was rated one of the fastest and most reliable Internet access services in the country in a survey conducted by Inverse Network Technology, a leading independent research service. Bell Atlantic Internet Solutions reduced the price of its entry- level package of Bell Atlantic.net and Infospeed DSL, making it more affordable.
- Demand for connectivity -- for home fax machines, telecommuting, phone lines for children or the Internet -- drove the number of additional lines in service up 16 percent over first quarter 1998, to approximately 5 million.
- Consumers took advantage of new packages combining Caller ID, Return Call, Call Waiting, Home Voice Mail and other features during Bell Atlantic's "Save Like Wild" promotions. The campaign resulted in more than 11 million value-added features, with the full impact on revenues to be seen in future quarters, since some promotions offered a month of free service.
- Caller ID revenues for the quarter increased more than 33 percent compared to first quarter 1998, as the number of subscribers increased to 6.8 million, for penetration of more than 25 percent. Home Voice Mail revenues rose 7.6 percent.
- Bell Atlantic's new National 411 Directory Assistance service proved to be an immediate success, with more than two million callers using the service since its February launch.
In network services markets:
- Special access revenues for the period rose 24 percent to $444 million for the quarter.
- By the end of the first quarter, Bell Atlantic was providing other carriers with approximately 725,000 resold access lines and 118,000 unbundled loops and platforms.
Adjusted Domestic Telecom operating expenses for the quarter of $4.8 billion increased less than one percent from first quarter 1998 levels, and cash expenses were down one percent.
The Global Wireless Group's performance in the quarter was fueled by strong subscriber growth in domestic and international markets. With 532,000 proportionate net additions, the group ended the quarter with 9.1 million proportionate customers, 35.2 percent above first quarter 1998 levels. International proportionate subscribers now exceed 2.2 million and comprise nearly 25 percent of the total Global Wireless customer base.
Total proportionate revenues grew to $1.3 billion, 30.5 percent higher than the prior-year period. Proportionate operating income increased 55 percent to $186 million, with operating cash flow increasing more than 30.8 percent to $382 million.
Bell Atlantic Mobile's popular digital services, led by its SingleRatesm price plans, produced another strong quarterly subscriber increase. BAM added 190,000 customers, 49.6 percent more than in first quarter 1998, and ended the quarter with 6.4 million customers, an increase of 16.6 percent.
- BAM's total revenue increased a strong 15.5 percent over first quarter 1998 to $908 million, with total revenue per subscriber of $48.
- Even while gross customer additions increased 40 percent over the prior-year period, BAM increased operating cash flow by 8.3 percent and maintained margins at 41 percent by continuing its control of acquisition costs and cash expenses. As a result, operating income grew to $172 million.
- Digital subscribers, who comprised more than 21 percent of BAM's customer base at the end of the quarter, now account for more than 50 percent of busy-hour usage on the company's network.
- During the quarter, Bell Atlantic Mobile expanded its distribution agreement with Radio Shack, adding 174 stores in the Philadelphia area to the retail chain's 518 outlets in New England and New York already selling BAM services.
- PrimeCo Personal Communications passed the one million-subscriber milestone in the quarter, less than two-and-a-half years after launching commercial service, and ended the quarter with 1.1 million customers. The quarterly net customer additions of 203,000 were the highest in PrimeCo history.
- PrimeCo's penetration of covered POPs was 2.7 percent, nearly double the first quarter 1998 results.
- Total PrimeCo revenues for the quarter grew nearly 80 percent over first quarter 1998 to $188 million. Average monthly revenue per subscriber in the quarter was $52, and operating cash flow for the quarter improved 40 percent over first quarter 1998.
Bell Atlantic's international wireless investments ended the quarter with 2.2 million proportionate subscribers, more than double the number in first quarter 1998. International proportionate net subscriber additions for the quarter totaled 248,000, 17.5 percent higher than in the prior-year period.
International proportionate revenues for the quarter were $280 million, a gain of 95.8 percent. Operating cash flow from international investments increased 127.5 percent over first quarter 1998 to $91 million, with proportionate operating income growing by $33 million to $51 million.
- Omnitel Pronto Italia, Bell Atlantic's Italian wireless investment, added 800,000 subscribers in the first quarter, reaching a total of 7 million, to become Europe's second largest wireless carrier. Over the past 12 months Omnitel has reduced its long distance rates by 75 percent, making the cost of international calls on its networks competitive with local landline carriers.
- Grupo Iusacell in Mexico posted strong results, ending the quarter with more than 840,000 subscribers, a 75 percent increase over first quarter 1998. Grupo Iusacell will announce results later today.
- Stet Hellas, Bell Atlantic's wireless investment in Greece, added almost 109,000 net customers in the quarter, more than double the number added during the same period last year. The company ended the quarter with almost 800,000 customers, nearly 80 percent higher than first quarter 1998.
Bell Atlantic is at the forefront of the new communications and information industry. With more than 43 million telephone access lines and 9 million wireless customers worldwide, Bell Atlantic companies 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-growth global communications markets, with operations and investments in 23 countries.
For further information on quarterly results, visit Bell Atlantic's Newsroom or Investor Information Websites (www.ba.com and www.bellatlantic.com/invest), or use Bell Atlantic's Fax on Demand service at 800-329-7310.
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 statements 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.