GTE Remains on Target with Third Quarter Earnings per Share Growth of 14 Percent - Company Financial Information

Cambridge Telcom Report, Oct 25, 1999

GTE Corporation reported strong third quarter 1999 financial results, with earnings per share (EPS) from consolidated operations of 97 cents, an increase of 14 percent over the year-ago quarter, on net income of $952 million. These results exclude a net after-tax gain of $416 million or 42 cents per share, primarily from the sale of its Government Systems business unit. Including this gain, net income was $1.4 billion with EPS of $1.39. Consolidated revenue was $6.4 billion in the third quarter compared to adjusted revenue of $6 billion in the third quarter of 1998, an increase of 8 percent. (Reported and adjusted results are described in the associated financial statements and accompanying notes.)

GTE Chairman and CEO Charles R. Lee said, "Our financial performance in the third quarter was excellent. Our business expanded profitably with 8 percent revenue growth and EPS growth of 14 percent, while we implemented our ongoing cost containment measures. We are on track to deliver our targeted earnings growth in the 13-15 percent range.

"The third quarter is evidence that we continue to make significant progress in our drive to transform GTE into a tier one growth company in our industry," said Mr. Lee. During the quarter, GTE completed the sale of substantially all of its Government Systems business to General Dynamics and reached additional agreements for the previously announced sale of non-strategic wireline properties.

To date, GTE has entered into agreements for the sale of 1.4 million access lines of the original 1.6 million to be sold. "As we near completion of our repositioning effort, I am pleased with the excellent prices the buyers have agreed to pay for these properties, exceeding our expectations and allowing us to generate after-tax proceeds in excess of $4 billion once the transactions are complete. These funds will be used to invest in higher growth Internet, data and wireless businesses," said Mr. Lee.

On October 8, GTE completed its previously announced acquisition of the Ameritech wireless properties located primarily in the Chicago and St. Louis areas. "Once our merger with Bell Atlantic is completed, our wireless properties will complement the new national business being created by Bell Atlantic and Vodafone AirTouch, creating the nation's premier wireless company," he said.

On GTE's merger with Bell Atlantic, Mr. Lee noted that progress toward its completion is gaining momentum. "Bell Atlantic's application to the FCC to provide long-distance services in New York is critical because it accelerates our ability to work with the FCC to get our merger approved, which we expect to occur in the first quarter 2000." Earlier this week, the New York Public Service Commission gave its full support to Bell Atlantic's FCC filing.

Consolidated Results

In the third quarter, consolidated revenue increased $464 million or 8 percent over adjusted revenue in the third quarter of 1998. Major contributors to this revenue growth include:

-- Internetworking data revenue growth of $134 million or 89 percent;

-- Long distance, video and CLEC revenue growth of $110 million or 39 percent;

-- International consolidated revenue growth of $76 million or 19 percent, with proportionate revenue growth of $230 million or 31 percent;

-- Network Services data revenue growth of $74 million or 30 percent;

-- Wireless revenue growth of $163 million or 21 percent (11 percent, normalizing for incollect revenue recognition);

-- Consumer vertical services revenue growth of 14 percent from products such as Caller ID;

-- Continued customer growth, including:

                            Total as of   Increase over    Percent
                               9/30/99   last 12 months   Increase

Global access lines(a)      28,622,000        2,762,000       11 %

Global wireless customers(a) 6,805,000        1,292,000       23 %

Long distance                3,195,000          679,000       27 %

CLEC bundles                   239,000          167,000      232 %

Video                          117,000           21,000       22 %

ADSL                            35,000           35,000        -

(a)  Represents domestic totals plus international proportionate
 access lines and wireless customers. All other statistics U.S.
 only.

In the quarter, consolidated adjusted operating income was $1.7 billion, an increase of $181 million or 12 percent over the same quarter last year. The increase resulted from revenue growth and the favorable effects of continuing cost-cutting initiatives. Operating income includes the losses associated with GTE's continuing investments in its data and competitive local exchange company (CLEC) initiatives.

National Operations GTE's national operations generated adjusted operating income of $1.5 billion in the third quarter, an increase of $83 million over the same quarter last year. National operations revenue increased $416 million to $6 billion over the same period. The major business units delivering these results include: