GTE Generates 11% Consolidated Revenue Growth and 10% Core EPS Growth in First Quarter, Before Previously Announced Charge

STAMFORD, Conn. - GTE Corp. today announced its first quarter, 1998 financial results by reporting a record consolidated revenue growth of 11 percent and earnings per share (EPS) growth of 10 percent from core operations, continuing its double digit core EPS growth for the eleventh consecutive quarter.

During the quarter, consolidated revenues and sales increased to $5.88 billion, compared to $5.28 billion in the first quarter of 1997. Earnings per share from core operations increased during the quarter to 76 cents on net income of $733 million, as compared to 69 cents per share or $665 million reported for the same period last year. Including the effects of the previously announced after-tax, non-recurring charges of $802 million (83 cents per share) and GTE's data initiatives (11 cents per share), a consolidated net loss of $178 million or 18 cents per share was reported.

GTE Chairman and CEO Charles R. Lee said, "GTE continues to enjoy strong revenue growth throughout our operations as we invest in high-growth opportunities that improve our competitive position. In fact, our first quarter consolidated revenue growth is the highest percent improvement ever recorded by GTE. We are successfully implementing our strategy to transform GTE into a growing, market leading provider of telecommunications services and are on track to achieve our financial objectives in 1998 and beyond." "We continue to be pleased with the progress we are making in our data and our national sales, service and marketing initiatives," Mr. Lee added. "In just the first quarter, revenue from our data initiatives grew 22 percent from the fourth quarter of 1997, and we expect to see strong growth in the future as we roll out new services such as high-speed (ADSL) Internet access. Further, we now have launched our national sales, service and marketing operations in four states with plans to be in several more in 1998. At the same time, we are carefully reviewing every opportunity to improve our competitive position by adding new capabilities. In this dynamic and highly competitive industry, we must remain flexible, with an ongoing focus on profitable growth and managing costs."

Consolidated Results

GTE's consolidated revenues grew 11 percent to $5.88 billion in the quarter, as compared to an increase of 7 percent in the first quarter of 1997. Major contributors to this quarter's revenue growth include:

  • Domestic access line growth of over 1.6 million, or 8 percent, including 5 percent growth in switched lines;
  • Domestic access minutes of use growth of 2.7 billion, or 14 percent;
  • Revenue growth of 25 percent in new and enhanced services, including
    Caller ID, Call Waiting and voice messaging;
  • 1.97 million new domestic customers added over the last 12 months for the following services:
    • Long distance 1,002,000, surpassing the two million customer milestone
    • Wireless 535,000
    • Dial-up Internet access 318,000
    • Video and competitive services 110,000

These volume improvements more than offset the expected continuing revenue erosion in the local toll calling markets (intraLATA) due to competition as well as price reductions GTE has implemented in those markets.

Consolidated operating income, excluding the pre-tax special charge of $755 million, was flat compared with the previous year. Even as GTE continued to make critical investments consistent with its ongoing transformation to a growth company, core operating income, which excludes both the pre-tax special charge and the data initiatives, reached $1.49 billion in the first quarter, resulting in 11 percent growth compared to $1.35 billion or an 8 percent increase in the year-ago quarter. Investments include the cost of expanded distribution channels in and out of franchise areas, the development of new products and services, and customer acquisition and start-up costs in the long distance, digital wireless and video markets. Without these opportunity investments, core operating income growth would have exceeded 15 percent.

Domestic Operations

Revenues from domestic network services, including both GTE's wireline and wireless operations, increased $228 million for the quarter to $3.8 billion. Contributing to wireline growth was a 10 percent increase in business lines and an 11 percent increase in second lines. Revenue from new services such as CentraNet, vertical services, voice mail, CyberPOP and other enhanced offerings increased $88 million or 25 percent. Additional wireline revenue from start-up opportunity investments added almost $100 million over the year-ago quarter with the long distance business generating growth of 168 percent or an increase of $76 million and the video service offering adding $7 million over the year-ago quarter.

Domestic wireless service revenues were $650 million, an increase of $33 million, or 5 percent. Consistent with industry trends, the impact of the 13 percent increase in subscribers in the wireless business was partially offset by competitive price reductions, resulting in a $1 reduction in revenue per subscriber per month from the fourth quarter of 1997. GTE helped to counter the impact of these competitive price reductions by reducing certain operating and acquisition costs. These actions improved operating cash flow margins from 35 percent to 42 percent this quarter while positioning the business to compete at lower levels of revenue per customer.

Data initiatives generated revenues of $172 million, contributing to the overall growth of GTE's National Operations. Important milestones included the number of dial-up customers exceeding the 400,000 mark, as well as significant expansion of GTE's new national, high-speed broadband network with the deployment of more than 2,000 miles of fiber infrastructure completed by the end of the first quarter. In the business market, GTE introduced two new product offerings: the Reach Enterprise suite of applications providing secure e-commerce and customer self-service, and the cost-saving IP FAX product.

International Growth

International operations achieved revenue growth of $103 million, or 16 percent, contributing $767 million for the first quarter of 1998. This growth was fueled by local price increases in the Canadian and Dominican operations, wireless customer growth of 33 percent and access line growth of 5 percent, as well as $50 million associated with new long-distance revenue settlement arrangements in one of GTE's Canadian operations. Normalized revenue growth, excluding these settlement arrangements, would have been 8 percent. The net income, excluding special and extraordinary charges for the current quarter from all international operations including affiliates, was $85 million, 15 percent higher than the year-ago quarter, reflecting strong growth in the Canadian and Dominican Republic operations as well as in CTI, a GTE affiliate in Argentina. During the first quarter, the Taiwan nationwide PCS joint venture, in which GTE holds a 12 percent interest, began commercial operations attracting nearly 400,000 customers.

About GTE

With 1997 revenues of more than $23 billion, GTE is one of the world's 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 7 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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