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To: PHG who wrote (5631)	4/13/1998 6:59:00 PM
From: Rono	Read Replies (1) \| Respond to of 10227

To all: Cheer up, be happy. Better days ahead. NEW YORK (Dow Jones)--The Baby Bell telephone companies, offsetting a slowdown in their wireless operations with continued growth in access lines and other services, are expected to post strong first-quarter earnings, analysts said. The group fended off would-be competitors in the local-telephone business, boosting access lines by an average rate of 4.5% for the quarter. Ongoing cost cuts and the healthy U.S. economy also contributed to robust earnings growth at most of the Bells. "You couldn't find a better operating environment than now," said Frank J. Governali, a telecommunications analyst at Credit Suisse First Boston Corp. "Life is good." Analysts predicted that SBC Communications Inc. (SBC), the aggressive San Antonio carrier, would post diluted earnings of 48 cents a share, up 14% from operating earnings of 42 cents a post-split share a year earlier. The Bell had a busy first quarter: In January, it agreed to acquire Southern New England Telecommunications Corp. (SNG), and throughout the period its Pacific Bell unit fought to restore and maintain services affected by El Nino-related storms. Despite such distractions, the company posted better-than-average access line growth, analysts said, and continued to generate cost savings associated with its acquisition of Pacific Bell. Bell Atlantic Corp. (BEL), too, drove earnings growth through merger-related cost savings, analysts said. For the first time since closing its purchase of Nynex Corp., the Bell is expected to post double-digit earnings growth. Analysts expect the company to earn $1.32 a share, according to First Call Corp., compared with $1.17 a year ago. Bell Atlantic certainly faces more competition from alternative local carriers in its territory than the other Bells. But those rivals have yet to have a negative impact on earnings, noted William Vogel, an analyst at NationsBanc Montgomery Securities Inc. "I don't think competition is a problem," he said. Analysts also expect earnings growth at or near double digits from smaller carriers BellSouth Corp. (BLS), Atlanta, and Ameritech Corp. (AIT), Chicago. BellSouth, the revenue-growth leader of the group, has stepped up marketing of add-on services such as Caller I.D. in its desirable Southeastern territory. Ameritech, meanwhile, recently announced plans to cut $3 billion in expenses over the next five years. According to First Call, analysts expect BellSouth to earn 77 cents a share, compared with 70 cents a year ago, and Ameritech to earn 53 cents a share, compared with 48 cents a split-adjusted share. U S West Communications Inc. (USW), the Denver "pure play" telecommunications company that is splitting from its sister cable operator this year, is expected to report scant earnings growth of 1.5%. The company's core operations grew at a rate consistent with the rest of the industry, but U S West continued to spend heavily to build out its digital-wireless property and pursue an out-of-region data strategy. Analysts expect the company to report 69 cents a share for the first quarter. The dark cloud in an otherwise sunny outlook for the Bells appears to be the cellular-telephone business, which faces tough competition from upstart digital carriers such as Sprint Corp.'s (FON) Sprint PCS and Nextel Communications Inc. (NXTL). In a recent report, analyst Daniel Reingold of Merrill Lynch & Co. estimated that local carriers' first-quarter cellular revenue would grow an average rate of 11.8% compared with average growth of 18.3% in the year-ago quarter. (The group included GTE Corp. (GTE) but did not factor in U S West Communications, which has not completed its new wireless network.) "Cellular is not a growth engine any longer," added Governali of Credit Suisse First Boston. In fact, some carriers will have to start cutting costs to match the startups' prices, something Bell Atlantic Mobile recently did. But Governali said he did not think such cost cutting would immediately drag down earnings, "at least not in the next couple of years."