GTE Announces Strong Financial Results,Generating Double-DigitConsolidated Revenue Growth and 11% Core EPS Growth in Second QuArter

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STAMFORD, Conn. - GTE Corp. today announced its second quarter 1998 financial results, reporting 10 percent consolidated revenue growth, and 11 percent earnings per share (EPS) growth from core operations. This is the 12th consecutive quarter of double-digit core EPS growth and the fourth consecutive quarter of double-digit consolidated revenue growth.

During the quarter, consolidated revenues and sales increased to $6.28 billion, compared to $5.69 billion in the second quarter of 1997. Earnings per share from core operations increased during the quarter to 81 cents on net income of $783 million, as compared to 73 cents per share, or $696 million, reported for the same period last year. Including the effects of the previously announced data initiatives, consolidated EPS of 70 cents remained constant compared to the second quarter of last year, when GTEs data initiatives were launched. The 11 cents per share dilutive impact of the data initiatives this quarter compares to 3 cents in the year-ago quarter.

GTE Chairman and CEO Charles R. Lee said, "Overall, we are very pleased with our second-quarter results. The key for GTE is continued profitable growth. We have embarked on an exciting strategy to accelerate our growth by investing in opportunities such as data and the creation of a new national sales, service and marketing business (CLEC). For example, we have announced one of the industrys largest deployments of high-speed ADSL Internet-access technology. ADSL operates over our existing high-quality network and enables our customers to simultaneously obtain telephone and Internet access on one line at speeds up to 25 times faster than the fastest dial-up modem. These actions, coupled with our strong core operations, enhance our competitive position."

Consolidated Results

GTEs consolidated revenues grew $585 million or 10 percent to $6.28 billion in the quarter, as compared to an increase of $399 million or 8 percent in the second quarter of 1997. Major contributors to this quarters revenue growth include:

  • Domestic access line growth of 1.6 million or 8 percent including 5 percent growth in switched lines;
  • Domestic access minutes of use growth of 2.4 billion or 13 percent;
  • Revenue growth of $115 million or 30 percent from enhanced services such as CentraNet, vertical services, voice mail and CyberPOP;
  • Long-distance revenue growth of $58 million or 83 percent;
  • Data revenues of $191 million in the current quarter vs. $11 million in the year-ago quarter in which the data initiatives were launched;
  • Additional domestic customer activity:



over last 12 months

as of 6/30/98

Long Distance



Dial-up Internet access

(revenue generating)






Video and Other Services



  • Revenue growth from consolidated international subsidiaries of 13 percent, including wireless customer growth of 26 percent.

These volume improvements, coupled with growth from integration and consulting services as well as equipment sales, more than offset the expected continuing revenue erosion in the local toll calling markets (intraLATA) due to competition and responsive price reductions GTE has implemented in those markets.

Core operating income in the second quarter was $152 million higher than the year-ago quarter. Even as GTE continued to make critical investments targeted at high-growth segments of the markets, core operating income, which excludes the data initiatives, reached $1.59 billion in the second quarter, resulting in 11 percent growth compared to $1.44 billion or a 7 percent increase in the year-ago quarter. The current quarter increase was primarily the result of core revenue growth from both domestic and international operations. Partially offsetting these increases were continuing investments, such as the cost of our new CLEC and customer-acquisition and start-up costs in the long-distance and digital PCS wireless markets. Without the costs associated with these investments, core operating income growth would have exceeded 15 percent.

Mr. Lee said, "GTE is one of the best-positioned companies in our industry today, especially as competition intensifies and customers seek bundled telecommunication products and services all on one bill. We are capitalizing on our inherent strengths, including a national footprint and one of the industrys broadest sets of service offerings. The suburban and rural composition of many of our markets continues to fuel GTEs industry-leading growth in access lines and minutes of use. These markets also attract less competition due to lower density of customers per square mile, which reduces the cream-skimming opportunities for competitors. Since the Telecommunications Act was passed in February 1996, GTE has lost only 50,000 lines to resale by other companies."

Domestic Operations

Revenues from domestic network services, including both GTEs wireline and wireless operations, increased $132 million over the year-ago quarter to $3.78 billion. Contributing to wireline growth was a 9 percent increase in business lines and a 9 percent increase in second lines. In addition to the 30 percent increase in new and enhanced services, wireline revenue from start-up investments added $83 million with the long distance business generating growth of 83 percent or an increase of $58 million and the video service offering adding
$7 million over the year-ago quarter.

Domestic wireless service revenues were $671 million, an increase of $17 million or
3 percent from the year-ago quarter. The impact of the 12 percent increase in subscribers in the wireless business was partially offset by targeted responses to competitive offerings in several markets, resulting in a reduction in revenues per subscriber per month of 8 percent from the second quarter of 1997. In an effort to counteract the impact of these revenue reductions, cost reduction initiatives were implemented. These actions improved operating cash flow margins from 36 percent in the year-ago quarter to 39 percent this quarter while positioning the business to compete at lower levels of revenues per customer.

Data initiatives generated revenues of $191 million, contributing to the overall growth of GTEs domestic results. Important milestones included the number of dial-up customers, including promotional users, approaching the 600,000 mark, as well as significant expansion of GTEs new national, fiber-optic network. GTE is right on schedule with deployment of its new state-of-the-art national fiber-optic network, having activated more than 5,500 miles of fiber, over one-third of the total network.

International Growth

Consolidated international operations achieved revenue growth of $93 million or
13 percent over the year-ago quarter, contributing $793 million for the second quarter of 1998. This growth was generated by local price increases, wireless customer growth of 26 percent and access line growth of 4 percent. The international net income growth in the second quarter was $109 million, 23 percent higher than the year-ago quarter, reflecting strong volume growth including significant customer expansion in the Canadian and Latin America operations. Wireless customers from unconsolidated investments more than doubled over the last 12 months, providing a solid base for prospective results.

About GTE

With 1997 revenues of more than $23 billion, GTE is one of the worlds largest telecommunications companies and a leading provider of integrated telecommunications services. In the United States, GTE provides local service in 28 states and wireless service in 17 states; nationwide long-distance service and internetworking services ranging from dial-up Internet access for residential and small business consumers to Web-based applications for Fortune 500 companies; as well as video service in selected markets.

Outside the United States, the company serves over 8 million telecommunications customers. In addition, 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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