Electric Lightwave's Rapid Growth Continues. Revenue increases 21% from 1999 first quarter, 115% from 1998 second quarter - Company Financial Information

Cambridge Telcom Report, August 9, 1999

Electric Lightwave, Inc. (Nasdaq: ELIX), a leading facilities-based integrated communications provider, today announced continued rapid revenue growth and a decline in losses for the quarter ended June 30, 1999.

Revenues for the latest quarter were $46.1 million, or more than double the revenues of $21.4 million in the second quarter of 1998 and 21% above first quarter 1999 revenues of $38.2 million. The company's loss before interest, taxes, depreciation and amortization (EBITDA loss), excluding operating lease expense, was $15.2 million in the second quarter this year, compared with $21.3 million in the first quarter of 1999 and $10.9 million in the second quarter a year ago. The net loss in the 1999 second quarter was $33.2 million or $0.67 per share, compared with a net loss of $35.0 million or $0.70 per share in the first quarter of 1999 and $14.8 million or $0.30 per share in the prior year's second quarter.

"Our rapid revenue growth continued in the quarter, and we have passed the inflection point in our quarterly EBITDA losses," said Dave Sharkey, president of Electric Lightwave. "In addition to reporting normalized sequential revenue growth of 20% or better for the fourth straight quarter, we saw a number of very positive trends in the make-up of our total revenue. Internet access revenue, an important part of our Data Services revenue, was up 31% sequentially and 151% compared with last year. Local telephone service revenue, excluding reciprocal compensation, was up 37% sequentially and 131% year-over-year. Network services revenue was up 25% sequentially and 55% compared with last year, reflecting solid demand from large data customers and the expansion of our wholesale sales organization in the last year. All of these components are based on execution of our plan to drive growth by aggressively pursuing both the expanding data and Internet markets and the local telephone business where we have extensive networks."

Commenting on the company's operating performance, Sharkey added, "The significant EBITDA improvement from the first quarter is a product of both improved gross margins and higher productivity in our operations. The gross margin in the second quarter (defined as revenues minus network access expenses) was 49%, compared with 34% in the first quarter this year. Operations and selling, general and administrative expenses grew by 9% from the first quarter, while revenues were up 21%. This planned productivity gain is the result of significant investments in our systems, sales force and infrastructure last year. During the quarter we implemented the third version of our integrated, automated back-office system, and further enhancements are planned later this year. We expect further gains from this industry-leading system through the rest of 1999 and beyond."

For the six months ended June 30, 1999, Electric Lightwave's revenues were $84.3 million, or 103% above the first six months of 1998. The EBITDA loss, excluding operating lease expense, for the first half of 1999 was $36.6 million, compared to $19.3 million a year ago. The net loss for the first half of 1999 was $68.2 million or $1.37 per share, compared with a net loss of $26.7 million or $0.54 per share (before the cumulative effect of a change in an accounting principle) a year earlier.

Access line equivalents at the end of the second quarter were 121,516, an increase of 22,510 lines during the second quarter. The quarter-end total is 23% over the end of the 1999 first quarter and 123% above the total for the end of the 1998 second quarter. The company continued to have over 99% of its access line equivalents on-switch and had approximately 17,359 access line equivalents per voice switch. At the end of the first quarter, it had 4.6 gigabits per second of Internet capacity in its network, an increase of 48% over the total at the end of 1998. The company had also sold 4.3 gigabits per second of frame relay and asynchronous transfer mode (ATM) capacity at the end of the quarter, an increase of 72% from the end of 1998. Data and Internet-related revenue continued to make up over 50% of the Company's revenue in the latest quarter, including significant portions of its Local Telephone and Network Services as well as its Data Services.

"For the rest of the year we plan to continue solid revenue growth, improving gross margins and further productivity gains," concluded Sharkey. "With our expanded sales force, high-quality network and state-of-the-art systems, we are well-positioned to take advantage of the numerous opportunities in our markets."

Electric Lightwave, Inc. is a leading integrated communications provider of enhanced data services, frame relay, ATM and Internet access solutions to bandwidth intensive businesses and the growing e-commerce market. The company offers long distance, data and prepaid services nationwide. As a full-service provider, the company offers local, long distance, videoconferencing and high-speed broadband transport via an expanding fiber optic network that interconnects major markets in the West. Headquartered in Vancouver, Washington, Electric Lightwave is on the World Wide Web at www.eli.net. The company is 82% owned by Citizens Utilities (NYSE: CZN, CZNPr).