EXHIBIT 99.3
April 30, 1997
Fellow Shareholder,
The enclosed press release contains highlights of our 1997 first-quarter
results.
First-Quarter Results
As you will read in the enclosed press release, Citizens enjoyed
healthy revenue increases for the first quarter of 1997 over the corresponding
period in 1996. However, earnings and earnings per share for the quarter were
lower than those of the corresponding 1996 quarter.
Revenue increases were the direct result of aggressive investment and
sales and marketing activities in the expansion of Citizens' Electric Lightwave
and Citizens Communications. Another important investment, our new image and
branding campaign for Citizens Communications (formerly Citizens Telecom), which
features a new name and logo supported by print, radio and television
advertising, is aimed at boosting company recognition in our franchise
territories and adjacent areas. Increased brand name recognition is crucial to
the success of our in-market and out-of-market competitive telecommunications
strategy.
Results in Perspective
While we experienced substantial increases in revenue, 1997
first-quarter earnings were adversely affected by the large operating and
capital expenditures and expenses associated with our increased sales and
marketing activities, and network acquisition and construction costs related to
the expansion of our telecommunications operations. The impact of such large new
expenditures on earnings is not unique to Citizens, but has been experienced by
other peer companies which are also revamping their technological infrastructure
and retooling their culture to prepare for new opportunities.
The market today is demanding more and more of the services we are
providing. In order to continue to address customer demand promptly, we must put
in place the systems, products and enhancements they want. If we do not, another
provider will be all too ready to fill the need. As I shared with you in our
1996 annual report, we planned large expenditures in 1997 for such purposes. As
I also stated, Citizens' evolution into a full-service communications company
has been hard work, and that work is not yet over. It will continue to require
significant expenditure during the remainder of the year in order to more fully
develop, build and support the network and systems necessary to grow our
businesses. This investment, which will have an impact on 1997 and 1998
earnings, is crucial to sustaining the robust revenue and earnings growth that
has characterized the company for so many years. Citizens Communications and
Citizens' Electric Lightwave's rapidly growing revenue streams demonstrate that
they deserve additional funding.
Branding
To succeed in an open and competitive marketplace, our networks need to
be the state-of-the-art and our people alert to every opportunity. Customers
must know who we are and what we can offer. As a result, our strategy today is
focused on building and marketing a line of branded telecommunications products,
including local and long distance, cellular, videoconferencing, conference
calling, paging and more. Companies like AT&T, MCI and Sprint with great name
recognition have spent hundreds of millions of dollars on advertising and
promotion.
Our Strategy
Citizens is not trying to compete with these giants in terms of dollars
spent. Our strategy remains simple, though it is not without cost. It involves
focusing our spending on second- and third-tier markets which are experiencing
population and job growth rates above the national norm. These are the markets
where we have community-based operations and a strong reputation. This is where
we will concentrate our marketing of products and services branded with the
Citizens name. Our plan is to move into adjacent markets only where we can use a
locally based telemarketing and sales force.
We are deploying an extensive national distribution network to serve as
a pipeline for our products and services. Today we are carrying voice, video and
data traffic over thousands of miles of leased or owned network that
criss-crosses the United States.
This national distribution network is comprised of our local exchange
and long-distance facilities and those of Citizens' Electric Lightwave (ELI),
our competitive local exchange company. Today, ELI serves the Phoenix, Portland,
Seattle, Sacramento, and Salt Lake City metropolitan areas with a full range of
telecommunications services, including high-speed voice, data and video
transmission services over fiber-optic networks. ELI's continued expansion into
other cities in the West is central to our strategy.
Several other major initiatives that are requiring substantial
expenditures are underway and will also contribute to lowering 1997 earnings,
compared to 1996, but are nonetheless essential to achieving future record
earnings. Among these are: 1) the installation of a new uniform billing and
customer care system to address the inefficiencies of the multiple systems
inherited with the acquisition of the former GTE and ALLTEL properties; 2) a
Financial Group initiative to dramatically upgrade our in-house information
technology, allowing for flexible and more efficient recording and reporting
practices at multiple locations as well as providing more timely information to
our financial and operations managers, shareholders and the financial community;
and 3) branding and related identity projects for Citizens Utilities, Citizens
Public Services, and Citizens' Electric Lightwave.
Looking Ahead
The Board of Directors and management have made the hard choices
necessary for the continued good health of this remarkable company. Citizens'
earnings from operations continue to remain very sound and the company remains
in excellent financial condition. The actions being taken will improve our
ability to earn through the introduction of new products and services, growing
our markets while we address competition and evolving conditions in our
traditional markets. It is those who are most responsive to change who will
thrive in this newly competitive world.
I will continue to keep you informed of our progress. All of us at
Citizens remain committed to doing our best to create value for our
shareholders, customers and employees.
Sincerely,
Leonard Tow
Chairman
Enclosure