Bell Atlantic Third Quarter Adjusted EPS Rises 11.3%
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Bell Atlantic Third Quarter Adjusted EPS Rises 11.3%
Operating Income Increases 12.4%;
Data, Wireless Drive Higher Revenue Growth
October 21, 1998
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NEW YORK -- Strong operating performance in its key business units
produced third quarter 1998 adjusted earnings per share for Bell Atlantic
(NYSE:BEL) of 69 cents, 11.3 percent above third quarter 1997 EPS of 62
cents. EPS figures are on a diluted basis. Third quarter adjusted net
income of $1.1 billion was 12.7 percent higher than third quarter 1997 net
income of $969.4 million.
Third-quarter results have been adjusted for charges announced on Oct. 13,
mainly non-cash in nature, primarily for the completion of a retirement
incentive program, write-downs of certain international investments, and
merger transition charges. The charges total $.70 per share and result in
a reported net loss for the quarter of $ (8.1) million, or one cent per
share. In the third quarter of 1997, Bell Atlantic reported a net loss of
$ (80.1) million, or five cents per share, due to charges largely for the
Bell Atlantic-NYNEX merger.
Consolidated revenues grew 5.0 percent over third quarter 1997,
substantially higher than the growth rate in the first half of the year.
Proportionate revenues from Bell Atlantic's Telecom and Global Wireless
businesses, which include Bell Atlantic's share of revenue from its
unconsolidated wireless investments, increased 7.0 percent.
Consolidated operating income increased 12.4 percent, to $2.0 billion.
For the first nine months of 1998, adjusted net income available to common
shareowners rose 11.5 percent to $3.2 billion, and adjusted EPS was $2.03,
10.3 percent higher than $1.84 in the first nine months of 1997.
Nine-month EPS figures have been adjusted for special items totaling 82
cents per share in 1998 and 87 cents per share in 1997. Reported net
income available to common shareowners was $1.9 billion compared to $1.5
billion in the prior-year period. Reported nine-month EPS was $1.21,
compared to $.97 for the first nine months of 1997.
"With four quarters as a new company under our belt, we can say
unequivocally that we have delivered on the promise of the Bell
Atlantic-NYNEX merger," said Ivan Seidenberg, Bell Atlantic vice chairman,
president and CEO.
"Our new scale and scope, and the combination of our best operations and
marketing practices, have helped us increase sales, improve productivity
and achieve expense savings. With our merger synergies, we have been able
to produce solid operating results in our key businesses and fund our
entry into new markets as well.
"Now that the impact of the July 1997-June 1998 access charge reductions
is behind us, our Telecom revenue growth of four percent tracks more
closely with the record business volumes we've been experiencing all
year," Seidenberg said. "We're also seeing our first-half marketing
initiatives pay off in strong growth in vertical services.
"Almost half of our Telecom revenue gains came from sales of data-related
services, which is a clear sign of where our future opportunities lie. We
are rapidly building the network capabilities to provide the high-speed,
digital connectivity that our customers require, whether they are global
enterprises or small businesses or individual households. We've just
launched our mass-market connectivity product, Infospeed DSLsm, and already the response is exceeding our
"A key enabler for data services is long distance entry. We anticipate
filing our New York application with the Federal Communications Commission
in the fourth quarter, and we are working toward state support in
Pennsylvania as well. Given our commitment to open markets, we stand an
excellent chance of gaining FCC approval and completing our product
"Wireless, of course, will be part of that product set. Global Wireless
did another masterful job of driving subscriber and revenue growth and
profitability in the face of intense competition by introducing a new
digital pricing model at Bell Atlantic Mobile and accelerating the already
rapid growth of our international investments.
"Global Wireless will set the example for competitive entrepreneurship,
innovation and accountability as we reorganize into six business units,
each with the resources and people they need to succeed in competitive
markets," Seidenberg said. "We're well into the planning process, and we
will enter 1999 fully prepared to anticipate and meet customers'
requirements for new services and shareowners requirements for earnings
Demand for communications services in the Bell Atlantic region,
particularly data and vertical services such as Caller ID, drove Telecom
revenue growth up 4.0 percent over third quarter 1997. The number of
access lines in service grew 4.5 percent to 41. 3 million, and access
minutes of use increased 8.5 percent. More than two-thirds of Telecom
revenue growth came from sales of data and vertical services.
Demand for digital data services increased in all markets, particularly
in the enterprise (large business) and general business markets:
- 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 third quarter 1997.
- Revenues from high-bandwidth packet-switched and special access
services, and from BANI, Bell Atlantic's network integration business,
reached $597 million in the quarter, 30 percent over third quarter 1997
- Bell Atlantic ended the quarter with nearly 500,000 basic rate
Integrated Services Digital Network (ISDN) lines in service, up 22 percent
from third quarter 1997, and the number of primary rate ISDN channels in
service more than doubled, to more than 715,000.
In consumer markets:
- New pricing packages and targeted campaigns drove substantial gains in
sales of vertical services such as Caller ID, Return Call, Call Waiting
and Home Voice Mail. Revenues from these services were up 15.5 percent
compared to the prior-year period.
Revenues from Caller ID and Caller ID Deluxe grew 48 percent, as the
number of subscribers increased to 6.2 million, with a penetration rate
approaching 24 percent. Revenues from Home Voice Mail service rose 19.5
- Bell Atlantic launched high-capacity digital Infospeed
service on Oct. 5 to consumers in the Washington, D.C. and Pittsburgh
areas. Initial results indicate strong interest in the service, which is
packaged with Internet access. More than 2,000 requests for the service
were registered at the Infospeed website (www.bellatlantic.com/infospeed)
in the first week after the launch.
In network services markets:
- At the end of the quarter, Bell Atlantic was providing other carriers
with approximately 540,000 resold access lines and 60,000 unbundled loops.
Adjusted quarterly network operating expenses of $5.2 billion were 1.8
percent above third quarter 1997 levels, with cash expenses up 1.1
percent, as the company continued to realize expense savings and
productivity gains from the Bell Atlantic-NYNEX merger.
Global Wireless posted one of its strongest
quarters ever, with vigorous performance at Bell Atlantic Mobile (BAM) and
PrimeCo Personal Communications, Bell Atlantic's domestic PCS partnership,
as well as increasingly strong contributions from its International
Wireless portfolio of investments.
Proportionate subscribers increased 35 percent over third quarter 1997 to
7.9 million, with proportionate net subscriber additions in the quarter
totaling 549,000, 53 percent more than in the prior-year period. Domestic
properties and international investments each contributed approximately
half of the net additions, demonstrating Global Wireless's strength across
its entire portfolio.
Total proportionate revenues for the group increased 27.5 percent and
reached $1.2 billion, with international ventures and PrimeCo generating
more than 60 percent of the growth. Proportionate operating income
reached $242 million, up 33 percent from third quarter 1997.
Bell Atlantic's domestic wireless properties continued their strong
customer and revenue growth. With 207,000 net subscriber additions, BAM
ended the quarter with 5.9 million customers, 17 percent higher than third
quarter 1997. PrimeCo ended the quarter with 108,000 net subscriber
additions and grew its subscriber base 170 percent, to 706,600. BAM
revenues for the quarter grew $100 million, or 12.5 percent, to $903
million, and total PrimeCo revenues grew to $131 million, up $76 million
over third quarter 1997, with average monthly revenue per subscriber of
- BAM's digital subscriber base climbed to more than 565,000 during the
quarter, driven in part by the introduction of the company's new
DigitalChoice SingleRatesm price plans
late in the third quarter.
Early results indicate the all-inclusive flat rate plans are successfully
retaining and attracting high-usage wireless subscribers. Twenty percent
of new subscribers in the quarter took a DigitalChoicesm plan, and digital
subscribers now generate approximately 30 percent of BAM busy-hour network
- BAM reduced acquisition costs per new subscriber 11 percent to $202,
compared to $226 in the prior-year period. BAM also reduced cash expense
per subscriber by over 5 percent to a record low of $23.61.
- BAM operating cash flow for the quarter was $370 million, with
operating cash flow margins exceeding 47 percent. Operating income grew 8
percent to $234.4 million.
- J.D. Power and Associates' 1998 U.S. Wireless Customer Satisfaction
Studysm named BAM the leader in overall
customer satisfaction among
wireless users in New York, Boston, Washington/Baltimore and Pittsburgh.
Survey respondents rated call quality the most important factor in their
- PrimeCo extended its PrimeTravelsm
digital and analog coverage
areas through roaming agreements with several leading wireless carriers,
expanding the company's footprint to 90 percent of the U.S.
The International Wireless portfolio set new milestones for net subscriber
additions, revenue and operating cash flow. International proportionate
subscribers now exceed 1.6 million, as International Wireless made 291,000
proportionate net additions in the quarter, more than double the additions
in third quarter 1997. International proportionate revenues doubled over
third quarter 1997, climbing to $251 million. Proportionate operating
income more than tripled to $49 million, and operating cash flow more than
doubled to $70 million.
- Grupo Iusacell in Mexico ended the quarter with more than 660,000
subscribers, an increase of 95 percent over third quarter 1997.
Iusacell's net customer additions in the quarter were the highest in its
- Omnitel Pronto Italia added more than a million subscribers in the
quarter, bringing its total to almost 5 million. Omnitel is now the
third-largest wireless carrier in Europe.
- STET Hellas in Greece saw net subscriber additions of 76,000 and ended
the quarter with more than 580,000 subscribers, a 68 percent increase over
third quarter 1997.
Bell Atlantic is at the forefront of the new communications and
information industry. With 42 million telephone access lines and 8
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.
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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 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