AirTouch Announces Record 1st Quarter Earnings; World's Largest Wireless Company Posts Another
Million-Subscriber Quarter
Business Wire - April 22, 1999 08:38
SAN FRANCISCO--(BUSINESS WIRE)--April 22, 1999--AirTouch Communications
(NYSE:ATI) today reported a 68 percent jump in earnings for the first quarter of 1999, the second
straight quarter in which it added more than a million new subscribers.
Net income for the quarter was $257 million, compared to $153 million in the same period in 1998.
Earnings per share were up 43 percent to $0.43, beating analysts' estimates. AirTouch's sale of certain
investments accounted for about $0.08 per share.
AirTouch earned record profits in the first quarter while achieving record first-quarter subscriber gains.
Propelled by a continued surge of growth in international markets, the company added nearly 1.1
million proportionate subscribers, including 719,000 outside the United States, based on its ownership
share in wireless ventures in 13 countries on four continents. U.S. cellular and PCS ventures also
posted strong gains, with proportionate subscriber adds up 27 percent over the same quarter in 1998
(on a pro forma basis for the acquisition of MediaOne Group's U.S. wireless business).
AirTouch ended the quarter with more than 18.8 million proportionate subscribers. Its ventures, taken
as a whole, served nearly 44 million customers, making AirTouch the world's largest wireless phone
company.
"After a long string of terrific quarters, it's easy to take good results for granted," said AirTouch
Chairman and CEO Sam Ginn. "But it takes great execution to continue delivering such results. Our
international ventures once again racked up impressive gains and the U.S. side of our business
achieved remarkable customer growth in the face of heated competition. We are truly excelling on all
fronts."
Pro Forma, Proportionate Results
Highlights of AirTouch's operating results for the first quarter of 1999 -- reported below on a pro
forma, proportionate basis -- include:
-- Revenues exceeded $2.1 billion, up 27 percent over first quarter
1998.
-- Operating cash flow also soared 27 percent, to $834 million.
-- Operating cash flow margins were a healthy 39 percent, unchanged
from a year ago.
-- Capital expenditures were tightly controlled, rising only 3
percent.
Driving AirTouch's strong results for the quarter were the company's international operations, which
boasted 84 percent growth in subscribers, 55 percent higher revenues and 55 percent greater
operating cash flow. AirTouch turned in its third best quarter ever for international subscriber gains,
despite a history of seasonal declines in the first quarter. The extraordinary popularity of prepaid
service continues to stimulate demand in many markets, as wireless penetration shows no signs of
slowing down. Even with such rapid growth, international cash flow margins remained a strong 41
percent.
In the intensely competitive U.S. wireless market, AirTouch managed to boost its cellular and PCS
subscriber total by 20 percent, thanks to the proven value of its bundled-minute plans, clear digital
service and excellent customer care. Cash flow margins slipped two percentage points due in part to
one-time costs associated with Y2K and investment in the consolidation of many financial and
purchasing services. Other significant costs were associated with migrating our customer base to digital
technology and serving the higher usage demands of digital subscribers.
Additional recent highlights include:
-- AirTouch received a $15 million distribution from Belgacom Mobile
in Belgium in April and expects to receive $26 million from
Telecel in Portugal and $23 million from Europolitan in Sweden.
Together they will bring the cumulative returns from AirTouch's
international ventures to about $630 million.
-- AirTouch increased its ownership stake in Omnitel Pronto Italia
by 2.3 percentage points to 17.8 percent and in April raised its
share of South Korea's Shinsegi from 10.7 percent to 11.4
percent.
-- Japan's J-Phone Group announced in April that it reached its
four-million-customer milestone.
-- In the United States, reflecting strong consumer demand for the
latest technology, digital cellular subscribers accounted for 57
percent of first-quarter net gains and now represent nearly 17
percent of the base. PCS net gains, all of which were digital,
soared 62 percent over first quarter 1998.
-- Attractive digital plans and service quality helped drive average
minutes of use in the United States up more than 15 percent over
the same period a year earlier.
-- Prepaid service also showed strong signs of customer acceptance
in the United States, accounting for a third of net cellular
gains.
-- AirTouch Paging once again achieved double-digit growth in
revenues and subscribers.
-- AirTouch stood out in the crowded U.S. wireless market by
launching the AirTouch Promise, a 6-point pledge of superior
customer service.
Reflecting on these results, AirTouch's Ginn said, "I'm proud of our team. With all the excitement
surrounding the proposed merger with Vodafone, they stayed focused and delivered the kind of results
our shareholders have come to expect."
AirTouch Communications is the largest wireless company in the world based on the 44 million
customers served by its global ventures. AirTouch has 19 million proportionate customers based on its
ownership share in cellular, paging, and personal communications services in the United States,
Belgium, Egypt, Germany, India, Italy, Japan, Poland, Portugal, Romania, South Korea, Spain, and
Sweden. AirTouch also has an interest in the Globalstar satellite system. On January 15, 1999,
AirTouch and Vodafone Group Plc announced a definitive agreement to merge. If consummated, the
transaction would result in the creation of a global wireless company with more than 29 million
customers in 23 countries.
Note Regarding Pro Forma Data: The pro forma data included in this release reflect the MediaOne
Group merger as if it had been effective on January 1, 1998, and after giving effect to the purchase
method of accounting and other merger-related adjustments. These pro forma data are not necessarily
indicative of the future results of operations of the combined Company or the results of operations of
the combined Company that would have actually occurred. Given the significance of the MediaOne
Group merger, the Company believes that it is more meaningful to show comparative results on such a
pro forma basis.
For a copy of this or other AirTouch press releases, please call 800/344-7531 or visit the AirTouch
web site at www.airtouch.com.
Consolidated Statements of Income (Unaudited)
AirTouch Communications, Inc. and Subsidiaries
(Dollars in millions, except 1st QTR 1st QTR
per share amounts) 1999 1998 CHANGE
Operating revenues:
Wireless services and other revenues $1,334 $903 47.7 %
Cellular and paging equipment sales 92 55 67.3 %
Total operating revenues 1,426 958 48.9 %
Operating expenses:
Cost of revenues 180 119 51.3 %
Cost of cellular and paging
equipment sales 137 82 67.1 %
Selling and customer
operations expenses 426 261 63.2 %
General, administrative, and
other expenses 142 118 20.3 %
Depreciation and amortization expenses 275 144 91.0 %
Total operating expenses 1,160 724 60.2 %
Operating income 266 234 13.7 %
Equity in net income (loss) of
unconsolidated wireless systems:
U.S. (4) 100.0 %
International 162 81 100.0 %
Minority interests in net (income) loss
of consolidated wireless systems (45) (42) (7.1)%
Interest:
Expense (40) (19) (110.5)%
Income 2 6 (66.7)%
Miscellaneous income (expense) 68 (10) 780.0 %
Income before income taxes and
preferred dividends 413 246 67.9 %
Income taxes 121 79 53.2 %
Income before preferred dividends 292 167 74.9 %
Preferred dividends 35 14 150.0 %
Net income applicable to
common stockholders $257 $153 68.0 %
Net income applicable to common
stockholders - per share:
Basic $0.45 $0.30 50.0 %
Diluted $0.43 $0.30 43.3 %
Weighted average shares
outstanding (in thousands) 574,062 509,424 12.7 %
Pro Forma Proportionate Data (Unaudited)
AirTouch Communications, Inc. and Subsidiaries
NON GAAP SUPPLEMENTAL PROPORTIONATE FINANCIAL DATA
The following pages were prepared on a proportionate basis.
Proportionate presentation is not permitted by generally accepted
accounting principles ("GAAP") and is not intended to replace the
consolidated operating results prepared and presented in accordance
with GAAP. However, since significant wireless systems in which the
Company has an interest are not consolidated, proportionate
information is provided as supplemental data to facilitate a more
detailed understanding and assessment of consolidated operating
results prepared and presented in accordance with GAAP.
GAAP requires consolidation of wireless systems controlled by the
Company and the equity method of accounting for wireless systems in
which the Company has significant influence but not a controlling
interest. Proportionate presentation is a pro rata consolidation,
which reflects the Company's share of revenues and expenses in both
consolidated and unconsolidated wireless systems. Proportionate
results are calculated by multiplying the Company's interest in each
wireless system's total operating results, and accordingly should not
be compared with GAAP consolidated results of any company.
Net income under either GAAP or proportionate presentation is the
same.
Proportionately reported amounts include results from the
Company's equity investees, which the Company does not control. The
Company does have control over the revenues, expenses, or cash flows
of its equity investees that are reported in proportionate results and
is only entitled to cash from dividends received from these entities.
The Company does not own the underlying assets of its equity
investees.
In the United States, the Company is a joint and equal owner with
AT&T in CMT Partners and with Bell Atlantic in PrimeCo, the Company's
most significant U.S. equity investments. Internationally, the degree
of control of the Company's equity investees varies from venture to
venture. Although the Company generally has significant contractual
governance rights over these entities, it does not control them. No
person owns a majority of any of the Company's international equity
investees, with the exception of its investments in Germany, where
Mannesmann AG is the majority owner; Italy where Omnitel Sistemi
Radiocellulari Italiani is the indirect majority owner; Belgium, where
Belgacom is the majority owner; Romania, where Telesystem
International Wireless is the majority owner; and India, where RPG
Enterprises is the majority owner. In each of those investees, the
Company, or in the case of Italy, the Company's majority-owned
venture, has significant contractual rights regarding approval of
the business plan, which governs capital investments and use of cash
flows.
Pro Forma Proportionate Data (Unaudited) (1)(2)
AirTouch Communications, Inc. and Subsidiaries
TOTAL COMPANY
FINANCIAL DATA 1st QTR 1st QTR
(Dollars in millions except per share 1999 1998
amounts; operating data in thousands)(As Reported)(Pro Forma) CHANGE
Service and other revenues (3) $2,119 $1,664 27.3 %
Operating expenses before depreciation
and amortization expenses (4) 1,285 1,009 27.4 %
Operating cash flow (5) 834 655 27.3 %
Depreciation and amortization expenses 395 331 19.3 %
Operating income 439 324 35.5 %
Interest and other income (expenses) 42 (57) 173.7 %
Income taxes (189) (117) (61.5)%
Income before preferred dividends 292 150 94.7 %
Preferred dividends 35 35 0.0 %
Net income applicable to
common stockholders $257 $115 123.5 %
Earnings per share applicable to
common stockholders-basic $0.45 $0.20 125.0 %
Earnings per share applicable to
common stockholders-diluted $0.43 $0.20 115.0 %
Acquisition amortization expense, net of
applicable tax benefits (6) $75 $67 11.9 %
Earnings per share before acquisition
amortization - basic (6) $0.58 $0.32 81.3 %
Earnings per share before acquisition
amortization - diluted (6) $0.56 $0.32 75.0 %
Operating cash flow margin (7) 39.4% 39.4% 0.0 %
Capital expenditures and capital calls,
excluding acquisitions (GAAP Basis) $375 $405 (7.4)%
Proportionate capital expenditures $407 $394 3.3 %
Cellular and PCS subscriber net adds
in period, excluding acquisitions (8) 1,072 733 46.2 %
OPERATING DATA (In thousands) 3/31/99 3/31/98 CHANGE
Cellular and PCS POPs (8)(9) 239,494 215,930 10.9 %
Cellular and PCS subscribers (8) 15,279 10,815 41.3 %
Paging units in service (10) 3,543 3,228 9.8 %
Total proportionate customers 18,822 14,043 34.0 %
See footnotes.
Pro Forma Proportionate Data (Unaudited) (1)
AirTouch Communications, Inc. and Subsidiaries
U.S. CELLULAR AND PCS OPERATIONS
OPERATING DATA (In thousands) 3/31/99 3/31/98 CHANGE
Cellular and PCS POPs (8)(9) 96,480 93,492 3.2 %
Cellular and PCS subscribers (8)(9) 8,680 7,226 20.1 %
INTERNATIONAL OPERATIONS
OPERATING DATA (In thousands) 3/31/99 3/31/98 CHANGE
Cellular POPs (9) 143,014 122,438 16.8 %
Cellular subscribers 6,599 3,589 83.9 %
U.S. PAGING OPERATIONS (11)
OPERATING DATA (In thousands) 3/31/99 3/31/98 CHANGE
Units in service 3,468 3,140 10.4 %
See footnotes.
Operating Data (Unaudited)
AirTouch Communications, Inc. and Subsidiaries
TOTAL ENTERPRISE DATA
3/31/99 3/31/99 1Q99
Total Sys Total Sys Total Sys
(In thousands) POPs Customers(a) Net Adds
U.S. CELLULAR & PCS 148,527 10,376 468
INTERNATIONAL CELLULAR
Belgium - 25.0% 10,130 1,389 151
Egypt - 30.0% 54,500 98 60
Germany (b) - 34.8% 81,300 (i)6,500 (i)500
India - 20.0% & 49.0% 79,357 38 4
Italy - 17.8% 57,500 7,017 827
Japan - Digital Phone
Group - 13.0% - 15.0% 77,215 3,907 432
Japan - Digital TU-KA
Companies (c) - 4.5% 48,902 2,273 133
Poland - 19.3% 38,500 945 145
Portugal - 50.9%(d) 9,920 (i)1,370 TBA
Romania - 10.0% 23,200 361 36
South Korea - 10.7% 45,600 2,565 423
Spain - 21.7% 39,400 2,633 476
Sweden - 51.1% 8,830 666 42
TOTAL INTERNATIONAL 574,354 (i)29,762 (i)3,229
TOTAL CELLULAR AND PCS 722,881 (i)40,138 (i)3,697
PAGING (10) N/A 3,643 32
TOTAL ENTERPRISE 722,881 (i)43,781 (i)3,729
(i)More than
(a)Subcriber information conforms to AirTouch's subscriber policy and
may not be the same as the individual countries' policy.
(b)Germany subscriber information is rounded to the nearest hundred
thousands.
(c)Cost based investments which are not included in proportionate
results.
(d)Portugal will release its first quarter's results subsequent to
AirTouch's release.
See footnotes.
FOOTNOTES
(1) On April 6, 1998, the Company completed the transaction to acquire
the U.S. cellular business and the 25% PrimeCo Personal
Communications, L.P. interest of MediaOne Group, formerly U S WEST
Media Group ("the merger"). The first quarter of 1998 pro forma data
reflect the merger as if it had been effective at the beginning of
1998, and after giving effect to the purchase method of accounting and
other merger-related adjustments. These selected pro forma data are
intended for informational purposes only and are not necessarily
indicative of the future results of operations of the combined Company
or the results of operations of the combined Company that would have
actually occurred.
(2) Proportionate debt on a Total Company basis, which includes both
consolidated and unconsolidated entities, was approximately $4.0
billion and $2.3 billion as of March 31, 1999 and 1998, respectively.
Pro forma proportionate debt on a Total Company basis was
approximately $3.8 billion as of March 31, 1998.
(3) Total Company "Service and other revenues" include "Net operating
revenues" of U.S. Paging Operations.
(4) Includes net losses on handsets sold.
(5) "Operating cash flow" is defined as "Operating income" plus
"Depreciation and amortization expenses" and is not the same as cash
flow from operating activities in the Company's Consolidated
Statements of Cash Flows. Proportionate operating cash flow represents
the Company's ownership interest in the respective entities' operating
cash flows. As such proportionate operating cash flow does not
represent cash available to the Company.
(6) "Acquisition amortization expense, net of applicable tax benefits"
is defined as amortization expense of intangibles related to the
acquisition of interests in wireless systems net of related tax
benefits. "Earnings per share before acquisition amortization" is
calculated by adding back "Acquisition amortization expense, net of
applicable tax benefits", to "Net income applicable to common
stockholders" and dividing the results by the "Weighted average shares
outstanding." Such calculation is not in accordance with GAAP and is
shown here only to provide supplemental financial information.
(7) "Operating cash flow margin" is calculated by dividing "Operating
cash flow" by "Service and other revenues" or in the case of U.S.
Paging Operations, dividing "Operating cash flow" by "Net operating
revenues."
(8) PCS data relates to PrimeCo Personal Communications, L.P.
("PrimeCo"), a U.S. personal communications service ("PCS") business
in which the Company had a 50% interest at March 31, 1999 and a 25%
interest at March 31, 1998. For the pro forma data, the Company's
ownership interest in PrimeCo is 50% for all periods presented.
Because PrimeCo does not own 100% of all its markets, the Company's
share of PrimeCo's operating results is slightly less than 50%.
Beginning in 1999, the PCS data is included with the Company's U.S.
Cellular data. 1998 information has been adjusted to conform to this
presentation.
(9) POPs means the estimated market population multiplied by the
Company's ownership interest in a licensee operating in that market
and includes markets in which the networks are under construction and
the markets of certain cost-basis investments not included in
proportionate operating results.
(10) Total Company "Paging units in service" include both U.S and
International paging units in service.
(11) U.S. Paging Operations are wholly owned by the Company and
include operations in Canada which are not material to the information
presented.
CONTACT: AirTouch Communications, Inc.
Kathy Reinhart, 415/658-2042
Jonathan Marshall, 415/658-2209
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