U S WEST COMMUNICATIONS GROUP 1996 SECOND QUARTER EARNINGS
PAGE
EXHIBIT 99A
U S WEST Communications Group
Release Date: July 25, 1996
Contact: Dave Banks (303) 804-6752
U S WEST COMMUNICATIONS GROUP REPORTS IMPROVED PROFITS AND SECOND STRAIGHT
QUARTER OF RECORD REVENUES
- ACCESS LINE GROWTH ALSO CONTINUES AT RECORD PACE -
ENGLEWOOD, Colo. -- Fueled by continued record growth in revenues and
telephone access lines, U S WEST Communications Group (NYSE:USW) reported
second quarter normalized income of $289 million, a 2.1 percent increase, on
an adjusted basis. Earnings per share (EPS) grew by 1.7 percent on a
normalized basis, to $.61 from $.60 in the same period in 1995. Second
quarter net income, before one-time items, was $324 million, a 10.6 percent
increase, with EPS growing 9.7 percent to $.68 from $.62.
Second-quarter revenues continued growing at a record pace -- a trend
started in the first quarter -- increasing 6.9 percent to $2.5 billion from
$2.3 billion a year ago. However, earnings for the quarter were tempered by
higher operating expenses, which totaled $1.93 billion, an 8 percent increase
over second quarter, 1995.
REVENUE GAINS CONTINUE AT RECORD PACE
Revenue gains were driven by:
- - Record growth in access lines, up 4.9 percent (excluding the sale of
selected rural telephone exchanges) over the past 12 months. This includes
4.1 percent growth in residential lines, a growth rate of 32.9 percent in
residential additional lines, and growth in business lines of 6.9 percent.
- - Solid growth in network access minutes of use, up 9.9 percent;
- - The highest-ever growth rate in local service revenues, up 9.6 percent;
- - Strong growth in revenues from value-added services, such as Caller ID,
Call Waiting, Voice Messaging, and data networking services, up 59.3 percent
from last year. Within that category, CLASS revenues more than doubled and
Voice Messaging revenues increased 28 percent. !NTERPRISE (registered
trademark), the data networking services division of U S WEST Communications,
reported revenue increases of more than 100 percent compared to the same
period a year ago.
EXPENSES INCREASE IN SUPPORT OF VOLUMES AND GROWTH INITIATIVES
Expense increases were driven by:
- - Increased volume due to unprecedented access-line growth and continuing
service-improvement initiatives. The company had a net gain of 93,000 access
lines in the second quarter, a 24 percent increase compared with second
quarter, 1995. A majority of this growth occurred outside the company's major
metropolitan areas where the costs for providing service are
disproportionately higher than in more densely populated areas.
- - Increased costs associated with retail marketing programs which are
helping drive unprecedented revenue growth and positioning U S WEST
Communications with customers as competitors enter new markets.
- - Start-up costs related to new business initiatives, such as significant
expansion of data networking services, as well as preparation for entry into
long distance, video, and wireless markets. Without these costs, growth in
operating expenses during the second quarter would have been 6.4 percent
instead of 8 percent, and net income growth would have more than doubled.
"U S WEST Communications Group is making progress in growing revenues and
improving service," said Richard McCormick, chairman and chief executive
officer of U S WEST, Inc. "That's a critical step the company must take as it
prepares for an increasingly competitive marketplace."
"We continue to see accelerating top-line growth," said Sol Trujillo,
president and chief executive officer of U S WEST Communications Group. "That
tells me that our sharpened customer focus is working to drive strong revenue
growth, but we still have a lot of work to do to improve our cost structure."
Trujillo said the company continues to make progress in providing customer
service even with the unprecedented growth. For instance, the number of held
orders (for customers who've had to wait more than 30 days for new service)
has dropped nearly 30 percent since the end of second quarter, 1995.
"We're ahead of plan for restoring service to levels which will position
us for competition," Trujillo said. "Once we reach our goals on service
improvement -- which we expect to occur in the second half of this year --
we'll be able to intensify our focus on taking costs out of the business. We
believe the actions we're taking this year to manage growth, improve service,
and build new business initiatives will increase shareowner value in the
future."
SECOND QUARTER OPERATING HIGHLIGHTS
Operating highlights for the quarter include:
- - Continued to strengthen the management team. In April, the company
named Carey Balzer its new Vice President-Solutions. Balzer is leading the
company's effort to build comprehensive bundled solutions for targeted
customer segments. Prior to joining U S WEST Communications, Balzer held
market development positions at Sprint and AT&T.
- - Achieved substantial residential penetration levels of value-added
services: Call Waiting, 39.1 %; Caller ID, 17.3 %; Voice Messaging, 13.8 %.
The company also introduced several new services, including: Call Waiting ID,
which integrates Call Waiting and Caller ID; and Home Receptionist Screen
Phone, which visually and functionally integrates Call Waiting, Caller ID, and
Voice Messaging.
- - !NTERPRISE (registered trademark) announced an initiative to enhance
internet access and data communications for businesses and telecommuters
through digital subscriber line technology that allows faster data
communications over normal telephone wires.
- - Achieved penetration of better than 40 percent of the cable households
in its Omaha trial of TeleChoice (trademark) video services. In August, the
company will complete the trial phase, and the nearly 12,600 subscribers will
be converted from video dialtone to cable television customers, under recently
granted cable television franchise agreements.
U S WEST Communications Group provides telecommunications and high-speed data
services to more than 25 million customers in 14 western and midwestern
states. The company is one of two major groups that make up U S WEST. U S WEST
is in the connections business, helping customers share information,
entertainment and communications services in local markets worldwide. U S
WEST's other major group, U S WEST Media Group (NYSE:UMG), is involved in
domestic and international cable and wireless networks, directory publishing
and interactive multimedia services.
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[Safe Harbor statement: Some of the information presented in or in connection
with this announcement constitutes "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Although the
Company believes that its expectations are based on reasonable assumptions
within the bounds of its knowledge of its business and operations, there can
be no assurance that actual results will not differ materially from its
expectations. Factors that could cause actual results to differ from
expectations include: (i) greater than anticipated competition from new
entrants into the local exchange and intralata toll markets, (ii) changes in
demand for the Company's products and services, including optional custom
calling features, (iii) higher than anticipated employee levels, capital
expenditures, and operating expenses as a result of unusually rapid, in-region
growth, (iv) the gain or loss of significant customers, and (v) regulatory
changes affecting the telecommunications industry, including changes that
could have an impact on the competitive environment in the local exchange
market.]
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