SBC Reports Strong Revenue and Earnings Growth for Fourth Quarter, Full-Year 1999 - Company Financial Information

Cambridge Telcom Report, Jan 31, 2000

SBC Communications Inc. (NYSE:SBC) Tuesday announced that increased demand for its data services and wireless operations helped fuel strong fourth-quarter and full-year growth. For the full year 1999, earnings before one-time items, extraordinary items and accounting changes, grew 12.5 percent to $7.4 billion, from $6.6 billion in 1998, and diluted earnings per share increased 12.0 percent to $2.15, compared with $1.92 in 1998. Full-year revenues grew 8.0 percent to $49.0 billion, before one-time items.

Fourth-quarter revenues increased 7.9 percent to $12.9 billion, before one-time items. Earnings for the quarter grew 8.2 percent, before one-time items and extraordinary items, to $1.9 billion, from $1.7 billion a year ago, and diluted earnings per share increased 8.0 percent to $0.54, compared with $0.50 in the fourth quarter of 1998.

"As reflected by our fourth-quarter results, SBC continues to generate strong revenue growth, expand its business and create shareowner value while launching major growth initiatives to strengthen its role as an industry leader," said Edward E. Whitacre Jr., chairman and chief executive officer.

"During the final three months of 1999 we completed the acquisition of Ameritech, launched our national expansion plan and got off to a fast start with Project Pronto, our $6 billion initiative to dramatically accelerate the rollout of high-speed Internet access to most of our 53 million customers," Whitacre added. "We're delivering value to customers today while entering new markets and expanding our fastest-growing product lines to extend our leadership role tomorrow.

"We are moving closer to our goal of becoming the only communications company our customers will ever need," Whitacre said. "Once we receive federal regulatory approval, SBC will add long distance to its comprehensive communications solutions which today include local, wireless, high-speed Internet access and satellite television."

Major Growth Drivers During the fourth quarter, SBC achieved rapid progress in major business lines and initiatives that the company expects will drive its growth over the next several years. Based on the success of these initiatives and cost savings from merger integration, SBC expects to deliver earnings growth of at least 15 percent, and double-digit revenue growth beginning in 2001. Fourth-quarter growth driver highlights included the following:

-- Data Services: Fourth-quarter data services revenues increased 44.0 percent to $1.6 billion. Growth was fueled by continued strong demand for high-speed data transport services and by rapid growth in SBC's data communications services, which include applications, network integration services and Internet services.

To further accelerate data services growth, SBC is deploying Project Pronto, an initiative to transform its local network into a next-generation, high-speed Internet access platform. Project Pronto, designed to enable SBC to deliver Digital Subscriber Line (DSL) broadband service to more than 80 percent of its local telephone customers by the end of 2002, has already made good progress. SBC sold DSL service to 70,000 customers during the fourth quarter, and 169,000 for the full year. At the end of 1999, SBC had deployed nearly half of the 1,300 wire centers targeted by the project, and more than 10 million customer locations were DSL-capable. The company expects 16 million customer locations to be DSL-capable by year-end.

-- Wireless: In the fourth quarter, SBC's domestic wireless operations achieved a net gain of 458,000 subscribers, its strongest internal growth rate in several years. Total subscriber revenues increased 25.2 percent compared with the fourth quarter a year ago. Over the past year, SBC's domestic wireless subscribers increased 28.4 percent to 11.2 million, including strategic acquisitions made during the third quarter. SBC's domestic wireless operations include nine of the United States' 10 largest metropolitan areas and a total population of about 117 million. In November, SBC announced plans to further expand its wireless operations by acquiring Radiofone, which serves 200,000 wireless customers in markets covering approximately 2.4 million people in Louisiana and Michigan. SBC expects to complete the transaction during the second quarter of 2000.

-- International: SBC's broad international portfolio continues to be a powerful contributor to earnings growth. Fourth-quarter pre-tax income from SBC's international investments increased 22.8 percent over the comparable quarter a year ago. On a proportionate ownership basis, 1999 total revenues reported by SBC's international holdings increased 39 percent to $6.8 billion. Major growth contributors included the second-quarter investment in Bell Canada, and SBC's ongoing relationships with Tele Danmark and Telmex. SBC further strengthened its relationship with Telmex, the premier communications provider in Mexico, during the quarter by completing Telmex's acquisition of a 50-percent equity stake in Cellular Communications of Puerto Rico, and by investing with Telmex in Brazilian wireless provider Algar Telecom Leste, whose service area includes 17 million people; that transaction was completed earlier this month. SBC now has investments in 23 countries beyond the U.S., is the largest non-European investor in European telecommunications, and has an international portfolio with a current market value estimated at more than $25 billion.