GTE Reports 10% Revenue and Core EPS Growth in Fourth Quarter - Strategic Actions Creating Expansion

STAMFORD, Conn. - GTE Corp. today announced its fourth quarter financial results, reporting growth of 10 percent in earnings per share (EPS) from core operations for the tenth consecutive quarter, on consolidated revenue growth of 10 percent.

Earnings per share from core operations increased during the quarter to 89 cents on net income of $851 million, as compared to 81 cents per share reported for the same period last year. Including the effects of previously announced data initiatives, reported earnings per share was 73 cents on net income of $702 million. During the quarter, consolidated revenues and sales increased by 10 percent to a record $6.3 billion, compared to $5.8 billion in the fourth quarter of the prior year.

For the full year 1997, earnings per share from core operations increased
10 percent for the third consecutive year. Net income from core operations was
$3.04 billion, or $3.17 per share, compared to $2.79 billion, or $2.88 per share, excluding gains on the 1996 sale of certain non-strategic local-exchange telephone properties. Including the effects of the data initiatives, reported earnings per share was $2.92 on net income of $2.79 billion. Consolidated revenues and sales for the year increased
$1.92 billion, or 9 percent, to $23.3 billion, the highest annual revenue growth ever reported by the company.

GTE Chairman and CEO Charles R. Lee said, "1997 was a pivotal year for GTE. In May, we announced a number of key initiatives that continue to transform GTE into a leading national provider of telecommunications services, and implementation of these actions is on track. As a result, we are well positioned to capitalize on the fastest growing telecommunications segment, the Internet and data markets. Our initiatives included the acquisition of BBN Corporation, a leading supplier of end-to-end Internet solutions, as well as the construction of a national, state-of-the-art fiber-optic network. We continued to expand our data initiative in November with the purchase of Genuity, Inc., a premier value-added provider of distributed application hosting solutions that enable customers to transfer their business applications to the Internet. In 1998 we will expand and capitalize on our position in the data market, providing a significant new source of revenues and earnings growth.

"We are very pleased with the financial and operational results of our core business. Our results include the dilutive effect of other critical investments that are essential to our evolution as a growth company. These investments include enhanced service capabilities and expanded distribution channels in and out of franchise areas; and increased customer penetration in the long distance, video and digital wireless market segments. Without these investments, our core EPS growth would have exceeded 15 percent for the year. However, making the right investments today provides the foundation for future profitable growth and ensures that we are the leader in providing integrated communications services in the U.S. marketplace," Lee said.

Consolidated Results

GTEs consolidated annual revenue growth of 9 percent to $23.3 billion in 1997 compares to an increase of 7 percent in 1996.

Major contributors to the 1997 growth include:

• Record growth of over 1.5 million, or 8 percent, in domestic access lines, including 6 percent growth in switched lines;
• Record growth of 9.2 billion, or 13 percent, in domestic access minutes of use;
• Revenue growth of 55 percent, or $660 million, totaling $1.9 billion in new and enhanced services, including Caller ID, Call Waiting and voice messaging;
• 1.9 million new domestic customers for the following services:
  • long distance 889,000
  • wireless 738,000
  • Internet access 202,000
  • video and competitive services 73,000;
• Internationally, wireless subscribers of consolidated and unconsolidated affiliates increased a robust 74 percent.

"Customers are seeing more and more options as competition in the marketplace increases," Lee said. "Domestically, GTE's impressive customer growth demonstrates the strength of our existing competitive position and our ability to deliver a broad range of competitive service offerings. We remain committed to being a leader in providing bundled services, giving our customers convenience and ease of use unmatched in the industry. Internationally, we improved our existing competitive position and implemented a range of new initiatives in Asia, Europe and the Americas."

Consolidated operating income reached a record $5.61 billion in 1997 compared to $5.49 billion in 1996. Excluding the previously mentioned data initiatives, operating income from core operations increased 9 percent to $5.96 billion.

Domestic Operations

Revenues from domestic network services, including both GTEs wireline and wireless operations, increased 6 percent for the full-year 1997 to $14.5 billion. This compared to a 1996 growth rate of 6 percent to $13.7 billion.

Domestic telephone operations grew $1.2 billion, or 8 percent, to $15.1 billion for the year, compared to 4 percent growth in 1996, primarily due to a 9 percent increase in business lines and a 16 percent increase in second lines. Annual domestic wireless service revenues were $2.5 billion, a growth of $200 million, or 9 percent, while customer churn rates were reduced for the second consecutive year. The impact of the 20 percent increase in subscriber growth in the wireless business was partially offset by competitive price reductions, resulting in a $9 reduction in the revenue per subscriber per month. With these competitive price reductions, market share was maintained and cost reduction initiatives positioned the business to compete at these lower revenue levels in the future.

International Growth

International operations achieved annual revenue growth of $190 million, or
7 percent, contributing to a record $2.9 billion for 1997. The 1997 net income from all international operations was $366 million, 8 percent higher than 1996 net income, and was fueled by a combination of increased volume and prices in Canadian and Venezuelan operations, wireless growth in Canada, the Dominican Republic and Latin America, and a 6 percent growth in international access lines to 6.1 million. Profitability has also been enhanced by cost containment efforts and workforce reductions.

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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