NEW YORK — On accelerating revenue growth of 7.1 percent, Bell Atlantic Corp. (NYSE: BEL) increased adjusted net income for the first quarter of 2000 by 10 percent, to $1.3 billion from $1.2 billion in first quarter 1999. Adjusted earnings per diluted share (EPS) rose 9.6 percent to 80 cents from 73 cents in first quarter 1999.
"This was a terrific quarter, in which we continued to accelerate our revenue growth," said Bell Atlantic Chairman and CEO Ivan Seidenberg. "Not only are our growth engines firing on all cylinders, but our traditional business is continuing to expand as well. We're going into our combination with Vodafone AirTouch and our merger with GTE with terrific momentum."
First quarter highlights include:
- Approximately 428,000 residential long distance customers in the first three months of operation in New York.
- Data revenue growth of 31.8 percent, to $892 million.
- Net customer additions of 290,000 at Bell Atlantic Mobile, with 28.9 percent revenue growth.
- Doubled sales of Infospeed DSLsm service, ending the quarter with more than 60,000 digital subscriber lines (DSL) in service.
- An expanding wholesale business, with 1.9 million wholesale lines and approximately 328,000 unbundled loops in service at the end of the quarter.
- Continued strong International Wireless growth, with 365,000 proportionate net customer additions.
"The communications industry is undergoing a radical restructuring, and Bell Atlantic is further ahead in transforming itself than any other company," Seidenberg said. "Our long distance business is off to a rousing start; our data business is succeeding in the most data-intensive market in the country; we are building a thriving wholesale business, and we are reinventing our core business as a mass-market data provider.
"Our long distance results put us well ahead of schedule in meeting our target of one million residence customers by year-end. The overwhelming response we've received in New York demonstrates the effectiveness of our marketing message: surprise-free simplicity and superior customer service, all on one bill.
"Bell Atlantic Mobile had an excellent final quarter as a stand-alone company and came into our new wireless joint venture at full speed. Verizon Wireless opened for business this month as the market leader, with the most extensive network coverage, the best digital technology and the best national pricing plans of any U.S. wireless provider. We're very excited about the prospects for Verizon Wireless.
"We're equally excited about launching Verizon Communications, following our merger with GTE," Seidenberg said. "We completed state reviews of the Bell Atlantic-GTE merger in the quarter, and we are now waiting only for approval from the Federal Communications Commission. Our new name will signify just how much progress we have made in transforming ourselves into one of the communications industry's leading businesses."
Reported first quarter net income available to common shareowners was $731 million, or 46 cents per share, compared to reported net income of $1.1 billion, or 72 cents per share in first quarter 1999.
Reported results for first quarter 1999 reflect charges totaling 1 cent per share for transition costs related to the Bell Atlantic-NYNEX merger. Reported results for first quarter 2000 include charges totaling $536 million, or 34 cents per share, for a non-operating "mark to market" accounting adjustment related to the company's $3.2 billion in notes exchangeable into shares of Cable & Wireless Communications plc (CWC). Generally Accepted Accounting Principles require that when the market price of the underlying CWC shares exceeds the exchange price, the difference must be recognized as an increase in the company's liability for the notes and a charge to income. The company will make such an accounting adjustment in future quarters, recording either a gain or a loss to reflect any difference between the CWC market price and the exchange price at the end of the quarter.
Domestic Telecom Highlights
The Domestic Telecom Group's first quarter revenues grew 3.9 percent over first quarter 1999 on increased sales of core and advanced communications services, especially data services. The number of voice-grade equivalents (access lines plus data circuits) in service jumped 14.3 percent to 67.3 million, as more customers chose high-capacity, high-speed transport services. Switched access lines in service grew 2.5 percent to 43.1 million. Access minutes of use increased 4.4 percent in the quarter.
Bell Atlantic's long distance unit got off to a very strong start in its first quarter of operation in New York, adding 428,000 residential customers and exceeding its customer acquisition target. The unit attracted customers at all usage levels, and the international calling plans it offered to New York's diverse customer base generated strong international long distance revenues. The unit's average revenue per customer was in line with industry trends, and its churn rate was below the industry average.
Sales of data services accounted for approximately 84 percent of Domestic Telecom's revenue growth for the quarter. Data revenues reached $892 million for the quarter, 31.8 percent higher than in first quarter 1999. These include revenues from high-bandwidth packet-switched and special access services as well as Bell Atlantic's network integration business.
In the enterprise (large business) and general business markets:
- Bell Atlantic's Data Solutions Group revenues increased 47.8 percent over first quarter 1999, to $99 million.
- The number of "DS0" circuits in service (digital, high-bandwidth and packet-switched services as measured in 64-kilobit voice-grade equivalents) increased 42.7 percent over first quarter 1999, to 25.9 million.
In consumer markets:
- In addition to doubling the number of Infospeed DSL customers to 62,000, Bell Atlantic ended the quarter with 886 wire centers ready to sell DSL, with approximately 19 million access lines and more than eight million households qualified for the high-bandwidth Internet access service.
- Vertical service revenues continued to grow, as the number of packages combining Caller ID, Home Voice Mail and other features with basic services increased 40.7 percent over first quarter 1999. More than 30 percent of Bell Atlantic consumers subscribed to Caller ID at the end of the quarter, and the number of Home Voice Mail subscribers grew to 3.3 million.
In network services markets:
- At the end of the quarter, Bell Atlantic was providing other carriers with approximately 1.9 million wholesale access lines and approximately 328,000 unbundled loops.
- Special access revenues for the quarter increased 28.7 percent to $574 million.
Domestic Telecom's adjusted first quarter operating expenses of $5 billion were 4.7 percent above first quarter 1999 levels. Cash expenses increased 4.2 percent.
Wireless Group Highlights
In the last full quarter prior to the launch of Verizon Wireless, Bell Atlantic's Wireless Group posted strong gains at home and abroad.
The Wireless Group ended first quarter 2000 with 12.7 million global proportionate wireless subscribers, up 39.7 percent over first quarter 1999. Proportionate net customer additions in the quarter totaled 727,000, 36.7 percent more than in the first quarter of 1999, with Bell Atlantic Mobile (BAM) totaling 290,000 net additions, 52.6 percent more than in the prior-year period. Total proportionate wireless revenues for the quarter increased 32 percent to $1.7 billion. Proportionate operating income reached $294 million, an increase of 58.1 percent over first quarter 1999, with proportionate operating cash flow growing 43.2 percent to $547 million.
On April 3, Bell Atlantic and Vodafone AirTouch created Verizon Wireless, the market leader of the U.S. wireless industry, through the combination of BAM, PrimeCo Personal Communications, the U.S. cellular, PCS and paging assets of Vodafone AirTouch, and certain properties of ALLTEL Corp. Following the Bell Atlantic-GTE merger, Verizon Wireless will serve more than 24 million customers and cover 96 of the top 100 U.S. markets.
On April 4, Verizon Wireless introduced new nationwide flat-rate pricing options for consumer and business customers and announced it will invest more than $3 billion in its nationwide network in 2000 to further expand its CDMA network, introduce two-way short messaging service (SMS), deploy over-the-air provisioning capabilities, and conduct field trials of 3G technology. Bell Atlantic and Vodafone AirTouch also announced they are planning an initial public offering of part of Verizon Wireless.
Other domestic highlights:
- Bell Atlantic Mobile closed out the quarter with nearly 8 million customers, up 24.8 percent from first quarter 1999. Quarterly revenues grew 28.9 percent over first quarter 1999, to $1.2 billion. Average revenue per subscriber was up 3.8 percent, to nearly $50, and represents BAM's highest-ever ARPU growth year-over-year.
- Three-quarters of BAM's new retail customers subscribed to CDMA digital services. Nearly 45 percent of BAM customers use digital services, as BAM enjoyed its largest increase in digital subscribers in any quarter. Digital subscribers increased their share of BAM's busy-hour usage to 78 percent.
- Some 658,000 BAM customers subscribed to regional and national SingleRate(sm) plans at the end of the quarter. Approximately 60 percent of those subscribers are on plans priced at $59 a month or higher.
- BAM and Amazon.com announced an agreement that provides BAM customers with access to Amazon.com Anywhere service via their Web-enabled digital handsets. Users can select and purchase a complete array of products and services from Amazon.com.
- At PrimeCo Personal Communications, total revenues for the quarter grew 32.7 percent over first quarter 1999 to $250 million, with average monthly revenue per subscriber of $50. PrimeCo also reported positive operating cash flow that increased $55 million over first quarter 1999.
- During the quarter, PrimeCo grew its customer base to 1.5 million, 40.6 percent over first quarter 1999. PrimeCo ended the quarter with a 3.6 percent penetration rate of covered POPs.
Bell Atlantic's international wireless portfolio ended the first quarter with 4 million proportionate subscribers, up 79.8 percent over the prior-year period. International proportionate net subscriber additions of 365,000 rose 47.2 percent over first quarter 1999.
Proportionate international revenues for the quarter were $388 million, 38.6 percent higher than first quarter 1999. Proportionate operating income increased 94.1 percent over first quarter 1999, to $99 million, with proportionate operating cash flow growing 70.3 percent to $155 million.
- Omnitel Pronto Italia ended the first quarter having boosted usage through the introduction of Internet access and SMS services. Omnitel averaged more than 6 million SMS messages a day during the quarter, and expanded its Omnitel 2000 wireless portal through an agreement with French Net broker Self Trade to enable users to trade on-line and receive advice and trading alerts.
- EuroTel Praha added more than 180,000 new customers to finish the first quarter with approximately 1.25 million total customers. EuroTel, one of the first carriers in Europe to launch WAP (Wireless Application Protocol) technology for mobile Internet access, introduced its new GSM-Data Service, which at 43.2 Kbps provides the fastest mobile data transmission in Central Europe.
- Grupo Iusacell is expected to end the first quarter with approximately 1.5 million customers. In March, Iusacell became the first wireless provider in Latin America to launch WAP technology. The company also completed its first PCS trial calls in key markets of northern Mexico.
- STET Hellas added more than 95,500 new customers in the quarter, growing its base more than 60 percent and ending the period with 1.3 million subscribers. The company focused its efforts on its B Free prepaid products and introduced pricing plans to address the corporate and small- and medium-business markets. B Free buyers now represent more than 65 percent of Stet Hellas's total customer base.
Bell Atlantic (www.bellatlantic.com) is at the forefront of the new communications and information industry. With more than 44 million telephone access lines and more than 20 million wireless customers worldwide, Bell Atlantic companies are premier providers of advanced wireline voice and data services, market leaders in wireless services and the world's largest publishers of directory information. Bell Atlantic companies are also among the world's largest investors in high-growth global communications markets, with operations and investments in 23 countries.
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NOTE: This press release contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The following important factors could affect future results and could cause those results to differ materially from those expressed in the forward-looking statements: 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 timing and profitability of our entry into the in-region long distance market; the timing of, and regulatory or other conditions associated with, the completion of the merger with GTE 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.