GTE's 4th Quarter Contributes to a Strong 1999 Performance; Company Ends Year with EPS Growth of 14%

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IRVING, Texas -- GTE Corporation reported strong financial results for 1999 with adjusted earnings per share (EPS) of $3.49, a 14 percent increase over the prior year, on net income of $3.4 billion, excluding gains on the sales of properties and other special items. Including these gains and special items, reported EPS for 1999 was $4.12 on net income of $4 billion, compared to 1998 reported EPS of $2.24 on net income of $2.2 billion. Revenue of $25.3 billion for the year grew 9 percent from 1998 adjusted revenue of $23.3 billion.

Fourth quarter adjusted EPS was 98 cents, excluding a 5 cent net after-tax gain, primarily from the sale of GTE Information Systems. Including this net gain, fourth quarter reported EPS was $1.03. Revenue grew 13 percent in the fourth quarter to $6.7 billion from adjusted revenue of $6 billion in the fourth quarter of 1998.

GTEs purchase of wireless properties from Ameritech increased revenue by $186 million and reduced EPS by 2 cents per share in the fourth quarter. Excluding these new properties, fourth quarter revenue growth would have been 9 percent and EPS growth would have been 14 percent. The EPS dilution of 2 cents was caused principally by the non-cash amortization of goodwill associated with this purchase.

"Over the last few years, we have been transforming our company into a full-service telecommunications provider. Our focus has been on capturing high-growth opportunities, particularly in the Internet and data businesses, and in 1999 we made great strides in advancing this strategy, " said Charles R. Lee, Chairman and CEO of GTE. "Our newer growth businesses, which include data and our CLEC, increased revenue by 42 percent, with sales of data products and services reaching a record $2.5 billion. We began to aggressively market DSL services, supported by a competitively priced offer. And we completed our private high-speed fiber network, which will give GTE an edge in today's competitive marketplace.

"At the same time, we enter the 21st century with strong core businesses that performed very well in 1999 and provide a solid foundation for future growth. During the year, we expanded our wireless footprint with the acquisition of Ameritech's Chicago and St. Louis wireless properties and substantially increased our domestic customer base. We also successfully reached agreements to reposition non-strategic assets and will achieve in excess of $4 billion in after-tax proceeds once all the transactions are completed.

"Also during 1999, we continued to strengthen our international presence. We repositioned our investment in Canada, acquired a 40 percent ownership interest in the Puerto Rico Telephone Company, and won a PCS license and began construction of the PCS network for Buenos Aires, becoming a national provider of wireless services in Argentina. We also increased our minority ownership position in our wireless operation in Taiwan, which now has more than 3 million customers.

"At the same time, we continue to make progress in completing our merger with Bell Atlantic. All but two states and the FCC have given their approval and Bell Atlantic has won permission from the FCC to provide long distance services in New York State. We are optimistic that we can close our transaction in the near future," said Mr. Lee.

Consolidated Results

In 1999, consolidated revenue of $25.3 billion increased $2 billion, or 9 percent, over adjusted revenue of $23.3 billion in 1998. Major contributors to this revenue growth include:

  • Domestic access line growth of more than 10 percent and access minutes of use growth of 8 percent;
  • Network Services data revenue growth of $268 million, or 28 percent, including special access data lines, ISDN and DSL;
  • Consumer vertical services revenue growth of 14 percent for the year and 18 percent in the fourth quarter;
  • Wireless revenue growth of $675 million. When normalized for the newly acquired wireless properties and change in the manner of reporting in-collect revenue, growth accelerated 11 percent in the fourth quarter and was 7 percent for the year;
  • Internetworking data revenue growth of $457 million, or 79 percent;
  • International consolidated revenue growth of $302 million, or 20 percent, with additional investments fueling proportionate revenue growth of $897 million, or 31 percent;
  • CLEC bundled offering revenue growth of $141 million, or 157 percent;
  • Long-distance revenue growth of $217 million, or 36 percent;
  • Continued customer growth, including:



Total as of

Increase over
last 12 months


Global access lines*



11 %

Global wireless customers*




Long distance



26 %

CLEC bundles



263 %






*Represents domestic totals plus international proportionate across lines and wireless customers. All other statistics U.S. only.

In the quarter, consolidated adjusted operating income was $1.7 billion, an increase of $243 million, or 16 percent, over the same quarter last year. For the full year, consolidated adjusted operating income was $6.2 billion, an increase of $756 million, or 14 percent, above 1998. These increases resulted from revenue growth and the favorable effects of continuing cost-cutting initiatives. Operating income includes the losses associated with GTEs continuing investments in its data and CLEC initiatives.

National Operations

National operations revenue was $6.2 billion for the quarter and $23.6 billion for the year, increasing $668 million and $1.8 billion above the respective periods last year. GTEs national operations generated adjusted operating income of $1.6 billion in the fourth quarter, an increase of $218 million, or 16 percent, over the same quarter last year. For the entire year, adjusted operating income was $5.6 billion, an increase of $453 million, or 9 percent, from 1998. The major business units delivering these results include:

Network Services

Network Services revenue in the fourth quarter was $4.1 billion, an increase of $163 million, or 4 percent, from the same quarter last year. Total year revenue of $15.6 billion grew $326 million, or 2 percent, from 1998. These increases were 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 12 months, total access lines grew 10 percent, fueled by business switched access line growth of 7 percent and special access line growth of 36 percent. The strong growth in access lines reflects the underlying economic strength of the companys wireline markets. Minutes of use increased 8 percent both in the quarter and full year compared to the same periods in 1998.

For the full year, data revenue of $1.2 billion increased $268 million, or 28 percent, from last year. Data revenue includes special access data lines, frame relay, CyberPOPSM and DSL. By year-end, the company had obtained 57,000 DSL subscribers through a competitively priced offering and an aggressive marketing campaign. The latest promotion includes a free modem with a monthly charge of $49.95, including Internet access through At year-end, DSL was available from 550 central offices, representing approximately 6 million qualified lines, or approximately 30 percent of the companys total switched access lines.

Offsetting the revenue increases were mandated federal and state price reductions of approximately $73 million in the quarter and approximately $307 million in the year. In addition, toll revenue continued to decline due to intraLATA toll competition from long-distance carriers. Within the local market, approximately 400,000 of the companys 26.1 million domestic access lines have been lost to resale. However, over half of these were resold through GTEs CLEC, and the resulting net lines lost by GTE have been less than 1 percent to date.

Network Services operating income in the fourth quarter was $1.6 billion, an increase of $377 million over the same quarter last year. For the entire year, adjusted operating income grew $826 million, or 17 percent, to $5.8 billion. These improvements were principally due to continuing cost-cutting initiatives, including the employee reduction program initiated in the first quarter of 1999 and the related favorable settlement of employee retirement obligations.

Wireless Products and Services

Wireless revenue was $1.1 billion for the quarter and $3.7 billion for the year, including the Oct. 8 acquisition of Ameritech wireless properties in Chicago, St. Louis and Central Illinois. Excluding these new properties and adjusting for a change in the manner of reporting in-collect revenue, growth accelerated to 11 percent in the fourth quarter and was 7 percent for the year. Wireless subscribers now exceed 7.1 million, up from 4.8 million a year ago, for a growth rate of 48 percent, including the newly acquired markets (12 percent before the acquisition).

The favorable revenue and customer growth is the result of positive customer response to the GTE CHOICESM pricing plans, which provide bundled minute pricing with expanded footprint options. Introduced early in the year, the GTE CHOICE plans have attracted medium and high-value customers and positioned the company as a national competitor in anticipation of the national wireless venture with Bell Atlantic and Vodafone AirTouch. Due primarily to these new pricing plans, revenue per user per month averaged $46 during the year. Cash operating expense per customer dropped 10 percent to $26, reflecting productivity and process improvements, including the implementation of a single integrated billing system in the fourth quarter.

While revenue growth and cash operating expense show significant improvement, the GTE CHOICE pricing plans have increased roaming costs and total customer acquisition expenses through strong customer additions. As a result, operating cash flow margin decreased to 28 percent in the fourth quarter from 34 percent the same quarter last year and 34 percent for the year compared to 39 percent last year. GTE expects these roaming costs to significantly decline as the company gains a broader national footprint with Bell Atlantic and Vodafone AirTouch and takes advantage of the next generation of CDMA technology that enables providers to switch roaming partners more quickly.


Internetworking revenue was $301 million in the fourth quarter, an increase of $136 million, or 82 percent, from the same quarter last year. Revenue for the year exceeded $1 billion, increasing $457 million, or 79 percent, from 1998.

Revenue from business services, which include Web hosting, virtual private networks and e-business, doubled from the same quarter last year and increased 73 percent for the entire year. Revenue from networking services provided to on-line and Internet service providers increased over 50 percent in both the quarter and year. In December, GTE completed the initial layer of its fiber network which is now operational nationwide. This 17,000 mile, high-speed, high-capacity network spans more than 100 U.S. metropolitan areas and utilizes the latest in SONET ring technologies. This network will serve as the foundation for all data and advanced services provided by GTE business units, including Internet access, virtual private networks and DSL traffic.

Internetworking revenue does not include data revenue from other business units, such as traditional data circuits, CyberPOP and DSL sold by Network Services. Combined data revenue from all business units for the fourth quarter was $689 million and $2.5 billion for the year.

Although operating losses from Internetworking increased to $157 million in the fourth quarter and $552 million for the year, current year operating cash flow, which excludes depreciation, showed slight improvement from the prior year. GTE continues to invest in additional network capacity, selling and distribution channels, and new service offerings to build the scale and scope required to accelerate additional growth in this business.

Other National Operations

GTE Communications, which includes long-distance, CLEC and large business accounts, produced revenue in the fourth quarter of $431 million, an increase of $110 million, or 34 percent, from the same quarter last year, with annual revenue growing $450 million, or 42 percent, to $1.5 billion. This revenue growth was driven in part by a 26 percent increase in the number of long-distance customers over the past 12 months, ending the year with 3.4 million customers. In November, GTE launched its CLEC bundled service offering in Texas after receiving regulatory approval. GTEs CLEC, with 312,000 customers at year-end, is the largest residential CLEC in the nation.

GTE Directories revenue increased $40 million to $939 million for the year. Contributing to this revenue growth was the success of GTEs Internet directory web site,, which achieved 82 percent growth in revenue to $26 million, 81 percent growth in customers, and a 96 percent increase in page views compared to 1998.

International Operations

Net income from International Operations in the fourth quarter was $152 million, an increase of 14 percent from the same quarter last year, while annual adjusted net income increased 25 percent to $551 million. Proportionate revenues grew to $1.1 billion in the quarter, an increase of $289 million, or 37 percent, from the same quarter last year. Despite weak economic growth in Venezuela and Argentina, proportionate revenue for the year was $3.8 billion, an increase of $897 million, or 31 percent. The investment in the Puerto Rico Telephone Company and operations in Latin America and Taiwan contributed to this increase. Proportionate wireless customers more than doubled from last year, due to strong demand for prepaid wireless services in Latin America and rapid growth of the Taiwan wireless market.


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