GTE Reports Strong Results From Core Operations, Solid Gains in Customers and Demand for Services; Revenue Growth Reaches 5-Year High

STAMFORD, Conn. -- GTE Corp. today announced strong second-quarter results driven by the continuing strength in its core wireline and wireless operations. Earnings per share from core operations increased 11 percent during the quarter, to 73 cents per share on net income of $696 million, as compared to 66 cents per share reported in the prior year, excluding the impact of recently announced data initiatives launched in the quarter. Including the effects of the new data initiatives, reported earnings per share grew 6 percent to 70 cents per share, on net income of $671 million. During the quarter, consolidated revenues and sales increased by
7.5 percent to $5.69 billion, compared to $5.29 billion in the second quarter of the prior year.

"These results clearly demonstrate GTE's continuing success in profitably growing its core operations while, at the same time, taking the necessary steps to become a market-leading national provider of integrated telecommunications services," said GTE Chairman and Chief Executive Officer Charles R. Lee. "The new data initiatives that we announced this quarter -- the acquisition of BBN, the purchase of a national fiber-optic network from Qwest Communications and our strategic alliance with Cisco Systems -- coupled with the creation of a new national sales, services and marketing organization, reflect GTE's continuing transformation into a growth company. These investments, in one of the industry's most attractive segments, are necessary for GTE to establish itself as a true national provider of integrated telecommunications services," Lee noted.

"I'm particularly pleased with the top-line revenue growth of 7.5 percent -- the largest rate of quarterly growth in over five years," Lee stated. "These results not only reflect the strength of our markets, but also our ability to respond to our customers' needs with new and expanded service offerings, such as long distance, and to bundle them together on a single bill."

Consolidated Revenues and Sales Grow 7.5% -- A Five Year High

"The growth in our core wireline and wireless services, combined with new and expanded services, continue to accelerate GTE's top-line revenue growth," Lee said. The major factors contributing to the increase in consolidated revenues and sales include:

• 8% growth (1.6 million lines) in domestic access lines, including 5% growth in switched access and 34% growth in special access lines; at quarter end, GTE had 25% more second lines in service than a year ago;
• 14% growth in minutes of use of GTE's domestic local-exchange network for long-distance calling -- to 19.7 billion minutes;
• 74% growth or $198 million increase in sales of new and expanded services, including voice messaging, Caller ID, Call Waiting, long distance, and video. Penetration levels based upon capable lines for voice messaging, Caller ID and Call Waiting were 11%, 15% and 42%, respectively;
• 1.3 million long-distance customers added since March of 1996, more than 1 million added in the last 12 months;
• 28% growth in domestic cellular customers (903,000 new customers in the last 12 months, and 137,000 new customers added in the quarter).

  Revenues from domestic network services, which include GTE's wireline and wireless operations, increased $243 million, or 7 percent to $3.65 billion for the second quarter, compared with $3.41 billion in the year-ago quarter. Domestic cellular-service revenues totaled $654 million in the quarter, a $67 million or 11 percent increase over the prior year. At the end of June 1997, GTE had 4,146,000 domestic cellular customers, an increase of 903,000, or 28 percent, over the prior year. "I'm pleased with the solid growth of our customer base and the significant improvements in customer retention," Lee remarked. For the quarter, revenues per subscriber averaged $53, equal to the first quarter of 1997, but lower than the second quarter of 1996, which was $62, reflecting the impact of competitive promotions and pricing plans. Customer churn rates improved 17 percent from the same period last year and 30 percent from the fourth quarter of 1995. Also during the quarter, GTE completed the roll-out of wireless digital service in its PCS markets with the initiation of service in Seattle and Spokane, Wash., in addition to the Cincinnati market, which commenced service during the first quarter of this year.

  Other revenues, including directory services and other services and sales, grew 9 percent to $1.49 billion. This increase reflects higher volumes of telecommunications equipment sales and services, and higher systems and solutions revenues, offset, in part, by lower revenues resulting from the timing of international yellow page directory publications.

  "Our international operations are also producing solid results," said Lee. "With consolidated network services revenues of nearly $550 million in the quarter, they are growing revenues by more than 6 percent -- led by growth in cellular revenues that were partially offset by the increased competitive pressure on toll revenues. Network investments being made in Canada and the Dominican Republic will enable our customers to have access to highly advanced communications networks, and provide them with innovative products and services such as high-speed Internet and video-conferencing," Lee added.

  "I'm also pleased with the operational improvements at CANTV, our Venezuelan joint venture," Lee stated. "Improvements there continue with solid access line growth, cost controls and a stabilized currency. Significant price appreciation of the publicly traded portion of CANTV's shares, since the November IPO, is beginning to reflect the potential value of this excellent investment," Lee noted.

  Operating Income Grows to $1.4 Billion

  GTE's consolidated operating income grew 7 percent to $1.44 billion, excluding the effects associated with the recently announced data initiatives. Reported operating income grew 5 percent to $1.41 billion, compared to $1.34 billion in 1996, primarily the result of the continued growth in GTE's core wireline and wireless revenues and the favorable impact of ongoing operating cost-reduction programs. Partially offsetting these improvements were costs associated with the recently announced data initiatives, higher selling and marketing expenses associated with the growth in wireless and long-distance customers, the launch of PCS services and increased video activities.

  Six-Month Results

  For the first half of 1997, consolidated revenues and sales increased 7 percent to $10.97 billion, while operating income increased 6 percent to $2.75 billion. Earnings per share from core operations grew 11 percent to $1.42 per share on
  $1.36 billion of net income, excluding the effects of the data initiatives and gains on the 1996 sales of non-strategic telephone properties. Including the impact of the data initiatives and the 1996 gains on property sales, reported earnings per share grew
  8 percent in 1997 to $1.39 per share on net income of $1.34 billion, compared to 1996 results of $1.29 per share on net income of $1.26 billion.

  About GTE

  With revenues of more than $21 billion in 1996, GTE is one of the largest publicly held telecommunications companies in the world. In the United States, GTE offers local and wireless service in 29 states and long-distance service in all 50 states. GTE was the first among its peers to offer "one-stop shopping" for local, long-distance and Internet access services. Outside the United States, where GTE has operated for more than 40 years, the company serves over 6.8 million customers. 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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