Williams Communications Reports Third Quarter 1999 Results
PR Newswire - November 02, 1999 08:03
TULSA, Okla., Nov. 2 /PRNewswire/ -- Williams Communications Group, Inc., (NYSE: WCG) today reported unaudited third-quarter revenues of $498.3 million, an increase of $75.2 million or 18 percent over the third quarter of 1998. For the quarter ended Sept. 30, the company reported unaudited EBITDA loss of $33.9 million and a net loss of $85.9 million, or 19 cents per share, on a pro forma basis.
Revenues increased 157 percent to $86 million for the company's Network unit, gaining $52.5 million over the third quarter of 1998.
Williams Communications operating milestones for the third quarter included:
-- Extending the fiber-optic network to 19,600 route miles in operation, 22,600 miles of cable installed.
-- Launching a national wholesale switched voice network on Sept. 1.
-- Adding to a $21 billion book of business with significant network customer transactions.
-- Securing deals with top equipment vendors to enhance control and efficiency of the network.
-- Initiating a nationwide television advertising campaign.
-- Completing an initial public offering and high-yield debt package.
"As we begin reporting results as a public company, Williams Communications has fully funded the final stages of construction of the only exclusively carrier-focused fiber-optic network in the country," said Howard Janzen, president and chief executive officer of Williams Communications. "The successful completion of our recent initial public offering and concurrent high-yield debt offering provide ample capital to support the build-out of our award-winning network.
"The market's positive response to our unique strategy of carrier enablement puts us in an ideal position to expand our international, local and Internet Protocol capabilities. Strategic partners such as SBC Communications, Intel and Telefonos de Mexico have joined the growing list of sophisticated carriers that rely upon Williams Communications' specialized support.
"Within the enterprise market, we have deployed one of the largest sales and technical support groups of its kind to provide integrated equipment solutions for business customers across North America."
Williams Communications raised more than $3.4 billion in cash through the completion of its high yield and equity offerings. The proceeds included a $2 billion high yield offering, the $738 million initial public offering and concurrent investments totaling $738.5 million from SBC Communications, Intel, and Telefonos de Mexico. Trading of WCG shares on the New York Stock Exchange began Oct. 1.
The third quarter was highlighted by the introduction of a suite of integrated voice and data services for Williams Communications' targeted carrier market as well as the on-schedule achievement of new milestones in the construction of one of the nation's largest fiber-optic networks. Marking an overall ramp-up of its sales and marketing activity, a national television advertising campaign was unveiled last month after the company emerged from its post-IPO quiet period.
Williams Communications introduced switched voice services on a wholesale basis for local and long distance carriers, internet service providers and utilities. Part of a growing set of value-added voice and data services, the switched long distance product rolled out on Sept. 1 equips Williams Communications to become a preferred provider of long distance services for network customers such as SBC Communications. Approval of SBC Communications' merger with Ameritech last month expands the revenue potential of this key Williams Communications' alliance.
As part of its robust local-service strategy, Williams Communications extended its network into top-tier markets in an alliance with Metromedia Fiber Networks completed during the third quarter. In the 20-year agreement, the companies gain access to each other's fiber-optic networks. Earlier, Williams Communications secured a reciprocal agreement with WinStar to obtain comprehensive access to that company's wireless local service. Williams Communications also completed pacts in the third quarter to obtain local digital subscriber line services from a diverse set of vendors.
Williams Communications' long-term revenue commitments grew to $21 billion as its list of large network customers continued to expand, including third- quarter transactions with companies such as NET-tel Communications, Inc., ZipLink, Inc., and CapRock Communications Corp.
Williams Communications' nationwide fiber-optic network grew to 19,600 route miles in service and 22,600 miles of fiber in the ground during the quarter. In addition, 54 points of presence (POPs) have been completed along the network with floor space to accommodate the increased customer demand for equipment co-location space. The company has announced plans to complete more than 33,000 route miles connecting 125 cities by the end of 2000.
Of particular note, in the third quarter the company commenced carrying customer traffic on a key fiber-optic inland route from Portland, Ore., to Los Angeles. It also opened a new Network Control Center in St. Louis as a complement to its center in Tulsa. The St. Louis facility provides around- the-clock network management services for Williams' wholesale customers' networks while the primary control center in Tulsa monitors the company's overall network.
Underpinning the progress of the network build, major deals signed during the quarter with Inet Technologies, Inc., Ciena Corp. and Sycamore Networks will improve system monitoring capability and light the new fiber-optic network with throughput-boosting equipment.
In previous quarters, Williams Communications results were included with the quarterly reports of Williams (NYSE: WMB). Williams, which retains ownership of approximately 85 percent of Williams Communications shares, expects to report its third-quarter financial results Nov. 3.
Third Quarter Financial Highlights
Revenues: Williams Communications consolidated revenues for the quarter were $498.3 million, an increase of $75.2 million or 18 percent over the same period from the prior year. All three of the company's business segments reported year-over-year increases. This included a $52.5 million jump in Network revenues to $86 million and a $14.1 million increase in Solutions revenues to $359 million. Strategic Investments revenues increased $6.6 million to $64 million. Services provided to customers accounted for $35.8 million of the rise in Network's revenues. Solutions reported growth in all areas including maintenance and customer service orders, new systems and upgrades and professional services. Strategic Investments growth reflects increases in the international arena as a result of the August 1998 acquisition of PowerTel, an Australian fiber-optic network start-up venture.
Costs and expenses: Costs of sales on a consolidated basis were up $82.8 million to $391.3 million. Network's cost of sales increased $57.2 million to $87.8 million, including growth in off-net capacity of $23 million over the prior year and local access cost increases of $6.5 million. These sales-driven costs are being incurred, as expected, as Williams Communications grows its customer base in advance of the completion of its network. In addition, the Network business unit's operating and maintenance costs showed an anticipated increase of $16 million over the prior year as a result of the continued network build-out. Solutions costs rose $18.4 million to $263.9 million, due primarily to increased sales activity. Margins as compared to last year show competitive pressures in new system sales in the voice equipment business. Strategic Investments costs of sales rose $5.3 million to $50.3 million, primarily as a result of the company's acquisition of PowerTel.
Consolidated selling, general and administrative (SG&A) expenses of $137.7 million were up $17 million, almost entirely due to a $16.6 million increase in Network's total of $27.6 million. This growth coincides with expansion of staff to support new business as well as start-up costs associated with the development and offering of switched voice services. Solutions SG&A was up $5.9 million to $91.3 million while Strategic Investments decreased $5.4 million to $18.9 million.
Depreciation and Amortization: Compared to the same quarter in 1998, depreciation and amortization rose $12.9 million. This is due primarily to increased depreciation in Network of $10.6 million as a result of completing various stages of the network.
Capital Spending: For the quarter, Williams Communications capital spending was $373.6 million, including $342.6 million related to the network build-out. Excluded from these totals is an additional $51.9 million the company spent through its asset defeasance program.
About Williams Communications Group, Inc.
Williams Communications is North America's only exclusively carrier- focused fiber-optic network and the largest independent source of end-to-end integrated business communications solutions -- data, voice or video. Based in Tulsa, Okla., Williams Communications has 9,000 employees primarily in North America, with offices in Europe and Asia and investments in South America and Australia. Approximately 85 percent of WCG stock is held by Williams which, in 1985, became the first energy company to harness its core competency as a builder of networks to enable competition in the communications industry. Additional information, including detailed third- quarter financial data, is available at www.williams.com and www.williamscommunications.com.
EBITDA represents earnings before interest, income taxes, depreciation and amortization and other non-recurring or non-cash items, such as equity earnings or losses and minority interest.
All trademarks are the property of their respective owners. Portions of this document may constitute "forward-looking statements" as defined by federal law. Although the company believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. Any such statements are made in reliance on the "safe harbor" protections provided under the Private Securities Reform Act of 1995. Additional information about issues that could lead to material changes in performance is contained in the company's annual reports filed with the Securities and Exchange Commission.
This news release is not an offer to sell, nor the solicitation of an offer to buy, any securities. Any offer will be made only by means of a prospectus registered with the Securities and Exchange Commission.
SOURCE Williams Communications Group, Inc.
/CONTACT: media, Gil Broyles, 918-573-4740, or email,
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