GTE Delivers Strong First Quarter Revenue Growth of 10
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IRVING, Texas -- GTE Corporation announced first quarter 2000 results
with net income of $796 million and earnings per share (EPS) of 82 cents,
an increase of 11 percent over the year-ago quarter, excluding special and
extraordinary items that favorably affected both periods. Consolidated
revenue increased 10 percent to $6.1 billion from adjusted revenue of $5.6
billion in the first quarter of 1999.
"GTE continued to produce strong results in the first quarter, even as
we took steps to increase our long-term growth potential," said GTE
Chairman and CEO Charles R. Lee. "Our core operations continue to produce
solid results, allowing us to invest in higher-growth opportunities. As a
result we experienced significant growth in our data, wireless and
long-distance businesses as well as in bundled offerings.
"The last three months also included important milestones related to
our upcoming merger with Bell Atlantic, which we are targeting for later
this quarter. In March, Verizon Wireless was launched, combining the
wireless assets and capabilities of Bell Atlantic Mobile, AirTouch
Cellular, PrimeCo Personal Communications and AirTouch Paging. After our
merger with Bell Atlantic, we will add GTE's cellular and PCS properties,
completing the creation of the premier wireless company in the U.S.
"Other recent actions include our selection of Verizon as the new name
for the combined GTE-Bell Atlantic, contingent on FCC approval of our
merger, and renaming GTE Internetworking 'Genuity' as that business moves
forward with its initial public offering.
"The overall objective of our combined companies is to have the
industry's most complete and advanced portfolio of assets, capable of
satisfying the needs of communications customers on a global basis while
being poised to become the premier company taking advantage of growth
opportunities in this very dynamic market," Lee said.
Including special and extraordinary items, reported EPS was 83 cents in
the quarter compared to 90 cents in the same quarter last year. This
year's first quarter includes: an after-tax net gain of $20 million, or 2
cents per share, comprised of the gain on the sale of CyberTrust, a small
unit specializing in network security, partially offset by the write-down
of certain impaired assets; and an after-tax extraordinary charge of $9
million, or 1 cent per share, for the retirement of debt prior to stated
maturity for the Network Services access lines that will be sold. The
first quarter of 1999 included special and extraordinary items that
generated a net increase in EPS of 16 cents per share. These items
included an after-tax gain of $308 million, or 31 cents per share,
associated with the merger of BC TELECOM and TELUS; an after-tax special
charge of $119 million, or 12 cents per share, for employee separation
programs completed in April 1999; and an after-tax extraordinary charge of
$30 million, or 3 cents per share, for the retirement of debt prior to
GTE's consolidated revenue in the first quarter grew $544 million, or
10 percent, over revenue in the first quarter of 1999, adjusted for the
1999 sale of Government Systems. Major contributors to this revenue growth
- 30 percent, or $253 million, growth in domestic wireless revenue,
which includes the newly acquired wireless properties;
- 53 percent, or $87 million, growth in data services revenue from
Genuity, formerly GTE Internetworking;
- 28 percent, or $84 million, growth in Network Services data revenue,
including special access data lines, ISDN and DSL;
- 32 percent, or $59 million, growth in long-distance revenue;
- 246 percent, or $51 million, growth in CLEC bundled offerings;
- 79 percent revenue growth in SuperPages.com, GTE's internet
- Continued customer growth, including:
Total as of
Global access lines*
Global wireless customers*
|Represents domestic totals plus|
international proportionate access lines and wireless
All other statistics U.S. only.
In the quarter, consolidated adjusted operating income was $1.5
billion, an increase of $207 million, or 15 percent, over the same quarter
last year. This increase resulted from revenue growth and favorable
pension settlements, partially offset by losses from GTE's continuing
investments in its data and CLEC initiatives.
Revenue in the first quarter was $3.8 billion, an increase of $114
million, or 3 percent, from the same quarter last year. The increase was
due to growth in access lines, minutes of use, data and vertical services,
partially offset by mandated price reductions and intraLATA toll erosion.
Over the past year, total access lines grew 11 percent, driven by special
access line growth of 37 percent and business switched access line growth
of 7 percent. The strong growth in access lines reflects the continuing
strong economic health of the company's wireline markets. Access minutes
of use increased 5 percent compared to the same quarter last year.
Data revenue in the first quarter of $389 million increased $84
million, or 28 percent, from the first quarter last year. Data revenue
includes special access data lines, frame relay, CyberPOPSM and DSL.
At the end of the first quarter, the company had obtained
88,000 DSL subscribers through an aggressive marketing campaign and a
competitively priced offering. To meet the growing demand for this popular
service, the company began shipping modems and self-installation kits
directly to customers. In addition to providing customers with quick
installation and access to the Internet, this offering saves the expense
of sending a technician to the customer's premise. DSL is currently
available from 650 central offices, representing approximately 7 million
qualified lines, or approximately 33 percent of the company's total
switched access lines.
Network Services data revenue does not include data revenue from
Genuity and other unrelated business units. Combined data revenues from
all business units grew 32 percent from the year-ago quarter to $711
million, providing annualized data revenue of $2.8 billion.
Through successful promotions, consumer vertical service units
increased 4.6 million, generating additional revenue of $18 million, or 12
percent, from the same quarter last year. In April, Network Services
introduced a new sales initiative known as the 'Big Deal' that offers
customers package-discounts when they combine local and vertical services.
Customers can include long-distance, voice mail and dial-up Internet
access in their package to receive additional discounts.
Offsetting the revenue increases were mandated federal and state price
reductions of $53 million in the quarter and $278 million over the past 12
months. Although toll revenue has decreased from intraLATA toll
competition, the decline is lessening. Within the local market,
approximately 480,000 of the company's 26.7 million domestic access lines
have been lost to resale. However, losses to GTE amount to less than 1
percent of the total lines, since most of these were resold through GTE's
Network Services operating income in the first quarter was $1.4
billion, an increase of $168 million, or 14 percent, from the same quarter
last year. This improvement was principally due to revenue growth, the
impact of workforce reductions taken in 1999 and favorable pension
settlements, partially offset by rapid growth in access lines, DSL and
other cost of service increases.
Domestic wireless revenue in the first quarter was $1.1 billion, an
increase of $253 million, or 30 percent, from the same quarter last year,
including the benefit of the acquisition of wireless properties from
Ameritech in the fourth quarter of 1999. Subscribers grew 52 percent,
including the newly acquired properties. Excluding these new properties,
subscriber growth of 16 percent was achieved from an increase in prepaid
customers and favorable customer response to the GTE CHOICESM pricing plans, which were introduced a year ago.
The GTE CHOICE plans, which offer bundled minute pricing with expanded
roaming options, have positioned the company in anticipation of becoming
part of the Verizon Wireless venture with Bell Atlantic and Vodafone
Continuing productivity and process improvements have decreased monthly
cash operating expense per customer to $22, a 19 percent reduction from
the first quarter of 1999. Although revenue growth and cash operating
expense show significant improvement, the GTE CHOICE pricing plans have
increased roaming expenses. As a result, operating cash flow margin
decreased to 34 percent in the first quarter from 39 percent in the
year-ago quarter. GTE expects roaming costs for its customers to decline
due to the recent re-negotiation of roaming agreements and the
distribution of approximately 220,000 next-generation handsets that permit
remote roaming partner selection.
Genuity (formerly GTE Internetworking)
Genuity revenues of $250 million in the first quarter increased $87
million, or 53 percent, from the first quarter of 1999. Revenue from
access services, which include domestic dial-up, dedicated and broadband
access, increased 43 percent over the first quarter of last year and
contributed approximately two-thirds of the revenue growth. The increase
in revenues reflects an 80 percent growth in activated modems and a 24
percent increase in dedicated customer connections. In February 2000,
Genuity and America Online (AOL) announced that they had reached a
multi-year agreement to extend Genuity's existing role in providing
dial-up and broadband backbone Internet services to AOL in the United
States. In addition, Genuity will operate and continue the build-out of a
portion of AOL's dial-up network in Japan.
Web hosting revenues increased $12 million, or 117 percent,
from the same quarter last year, driven by an increase in Web hosting
customers. Also contributing to this growth was a 45 percent increase in
transport services and revenues from value-added e-business services, such
as Site Patrol (a managed security offering), Virtual Private Network,
Voice-over-IP and international connectivity, which more than doubled from
the same quarter last year.
Operating losses from Genuity increased to $197 million in the first
quarter due to continued network capacity expenditures, higher
depreciation expense and selling and distribution expenses.
GTE Communications, which includes long-distance, CLEC and large
business accounts, generated revenue in the first quarter of $429 million,
an increase of $88 million, or 26 percent, from the same quarter last
year. This revenue growth was driven in part by a 23 percent increase in
the number of long-distance customers over the past 12 months, ending the
quarter with 3.5 million customers. GTE's CLEC, which is the largest
residential CLEC in the nation, grew its customer base 238 percent over
the past 12 months to 365,000 customers at the end of the first quarter.
International proportionate revenues grew to nearly $1 billion in the
quarter, an increase of $161 million, or 20 percent, from the same quarter
last year. GTE's operations in Puerto Rico, Canada, the Dominican Republic
and Taiwan contributed to this increase. Proportionate wireless customers
increased 69 percent from last year due to the rapid growth of the Taiwan
wireless market and strong demand for prepaid wireless services in Latin
Net income from international operations in the first quarter was $131
million, consistent with net income in the same quarter last year. Higher
income from GTE's investment in Puerto Rico and improved results from
operations in the Dominican Republic were offset by start-up costs for the
Buenos Aires PCS wireless network and lower results at operations in South
On March 31, TELUS announced its plan to acquire 70 percent of
QuebecTel. GTE currently owns approximately 27 percent of TELUS and 51
percent of QuebecTel. Under the proposed transaction, TELUS would acquire
49 percent of QuebecTel from the public minority shareholders and 21
percent from GTE. Following the transaction, TELUS and GTE would own 70
percent and 30 percent of QuebecTel, respectively.
With 1999 revenues of more than $25 billion, GTE is
a leading telecommunications provider with one of the industry's broadest
arrays of products and services. In the United States, GTE provides local
service in 28 states and wireless service in 18 states, as well as
nationwide long-distance, directory, and internetworking services ranging
from dial-up Internet access for residential and small-business consumers
to Web-based applications for Fortune 500 companies. Outside the United
States, the company serves customers on five continents. Additional
information about GTE can be obtained at http://www.gte.com/.
GTE's community and philanthropic programs target excellence in
education, particularly math, science, technology and literacy. GTE also
supports job training, delivery of health and human services, and the
arts. The company's newest program is GTE Reads, a public charity designed
to create public awareness, increase fundraising and support organizations
dedicated to improving America's literacy levels. GTE customers can
contribute to GTE Reads by checking off a box on their bill. Others can
contribute through GTE SuperPages.com (http://www.superpages.com/).
# # #
Note: All references above to earnings per share (EPS) reflect diluted
earnings per share.
A copy of this release and associated tables can be found
on the Internet at http://www.gte.com/aboutgte/investor/1q2000/1q.html.
This announcement contains forward-looking statements. For each of
these statements, GTE claims the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995. If future events and actual performance differ
materially from GTE's assumptions, actual results could vary significantly
from the performance projected in these forward-looking statements.
The following important factors could affect future results and could
cause those results to differ materially from those expressed in this
announcement: materially adverse changes in economic conditions in the
markets served by us or by companies in which we have substantial
investments; material changes in available technology; the final outcome
of federal, state, and local regulatory initiatives and proceedings,
including arbitration proceedings, and judicial review of those
initiatives and proceedings, pertaining to, among other matters, the terms
of interconnection, access charges, universal service, and unbundled
network element and resale rates; the extent, timing, success, and overall
effects of competition from others in the local telephone and toll service
markets; the success of our efforts to expand service capability in the
data communication, long-distance and enhanced services segments of the
telecommunications marketplace and to provide a bundle of products and
services both in and outside of its traditional service territories; the
timing of, and regulatory or other conditions associated with, the
completion of our merger with Bell Atlantic and our ability to combine
operations and obtain revenue enhancements and cost savings following the
merger; and the ability of Verizon Wireless to combine operations and
obtain revenue enhancements and cost savings.