GTE Says It Will Slow Revenue Growth To Boost Profit
IRVING, Texas (Reuters) - GTE Corp. (NYSE:GTE - news), the
telecommunications company planning to merge with Bell Atlantic Corp.
(NYSE:BEL - news), said on Tuesday it would sacrifice revenue growth this year to ensure earnings per share growth between 13 percent and 15 percent.
''We have made pro-active decisions to sacrifice short-term revenue growth for short- and long-term earnings growth, even as we work to complete our merger with Bell Atlantic,'' GTE Chairman Charles
Lee said in a statement.
GTE said revenue from continuing operations would grow at a rate in the ''high single digits'' through 1999, instead of the previously estimated 10 percent to 12 percent growth.
GTE said the slower revenue growth would be due, in part, to accelerating competition in its wireline and wireless businesses, as well as plans to slow its nationwide expansion.
GTE also said it will cut costs and decrease the number of contractors and employees, primarily through attrition and other voluntary efforts, in its U.S. operations. These moves will save more than
$600 million annually starting in early 1999, GTE said.
''These actions, as well as our continued investments, will better position us for the further acceleration in revenue and EPS growth that we have projected for the combined company,'' Lee said.
GTE declined to elaborate on its cost-cutting plans, but said more details will be announced during the first quarter of 1999 as plans are finalized.
While GTE said it may cut certain jobs, trim overtime or reduce the use of contractors, it added that it also may add jobs in fast-growing areas such as data. GTE said it did not know yet how many jobs
would be cut, but it did not expect to see a significant reduction in its total workforce.
The company said it expected a one-time charge in the first quarter for the cost-cutting initiatives. The company also expects a one-time, non-cash gain of about $300 million after taxes in the first quarter of 1999, due to the merger of Canada's TELUS Corp. and BC TELECOM in which GTE had a 51 percent stake.
GTE said the gain from the BC TEL transaction is expected to more than offset the cost-cutting charge, resulting in a neutral to modestly positive boost to earnings.
GTE said its decision to moderate the pace of its nationwide expansion is due to the high cost of acquiring customers, regulatory hurdles and the belief that its expansion will be more cost-effective
after the merger with Bell Atlantic.
In its fast-growing long distance business, GTE said it will focus on selling long distance as part of a ''bundle'' or package of services and it will use more cost-efficient, direct sales channels.
GTE provides local telephone service in 28 states and wireless service in 17 states, and also provides long distance and Internet services.
Before the news was released, shares of GTE gained $5.44 to $67.94, while its merger partner Bell Atlantic gained $4.50 to $57.875. Both trade on the New York Stock Exchange.
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