EXHIBIT 99A
U S WEST COMMUNICATIONS, INC.
1801 California Street
Denver, CO 80202
[U S WEST Communications logo and registered mark]
News Release
Release Date: April 25, 1997
Contact: Dave Banks, 303-804-6752
U S WEST COMMUNICATIONS' EARNINGS PER SHARE
UP 11.5 PERCENT IN FIRST QUARTER
- CONTINUED HEALTHY REVENUE GROWTH AND COST CONTROLS DRIVE RESULTS -
ENGLEWOOD, Colo. April 25, 1997 -- U S WEST Communications Group (NYSE: USW)
today reported another record quarter of earnings growth. Continued healthy
revenue growth, successful marketing campaigns, and tighter cost controls in
its core business enabled the company to achieve double digit earnings growth,
while investing in growth initiatives and absorbing regulatory impacts.
First quarter 1997 normalized income increased 13.5 percent to $328 million,
up $39 million from the first quarter of 1996. Normalized earnings per share
grew to $.68 for the quarter, 11.5 percent higher than the $.61 in the first
quarter of 1996. Results for first quarter 1997 were normalized for an $11
million one-time, after-tax gain associated with the sale of selected rural
exchanges in Nebraska, while the first quarter 1996 results were normalized to
reflect the effects of a change in accounting principle.
With 5 percent revenue growth for the quarter and a continued slowing of
operating expense growth, up only 4 percent including costs associated with
starting up new business initiatives, the company was able to generate strong
earnings and expanded margins.
"U S WEST Communications Group has started off 1997 with double-digit momentum
on the heels of 1996's accelerating results," said Richard McCormick, chairman
and chief executive officer of U S WEST, Inc. "The U S WEST Communications
team has struck the delicate balance of running the business for today while
building it for tomorrow."
"This quarter's strong results reflect continued cost control initiatives, the
step-up of marketing efforts, and the continued vitality of our operating
territory," said U S WEST Communications president and CEO Sol Trujillo. "Our
continued focus on growing revenues, controlling costs and tightening
management disciplines throughout the business has enabled us to deliver the
results we've committed to our shareowners. At the same time, we are
investing in growth opportunities that will position us even better for the
future."
First Quarter Highlights Include:
Volumes and Penetration:
- - - The addition of 688,000 access lines (adjusted for the sales of selected
rural exchanges) over the past twelve months for an access line growth rate of
4.6 percent. On an adjusted basis, business access lines grew at 6.3 percent,
while residential access lines grew at 3.9 percent.
- - - A 29 percent increase in residential customer additional access lines
versus first quarter 1996, including growth of 81,000 lines in the first
quarter of 1997 alone -- driving penetration of this service to 11.6 percent.
- - - An unprecedented one-quarter gain of over 900,000 Caller ID subscribers
- - -- the result of an aggressive and highly successful promotional campaign --
driving residential penetration of this product to 26 percent. Revenue
generation from these significant sales will primarily begin during the second
quarter.
- - - An increase of 19.1 percent in customer order volumes versus the first
quarter of 1996, including orders for new services, transfers, and changes.
- - - Voice messaging subscriber levels reached over 1.3 million -- driving
residential penetration of this product to approximately 16 percent.
Sales and Revenues:
- - - Local service revenue growth of 7.5 percent, with almost half of the
growth driven by the sales of vertical features. Adjusted for a one-time
reduction in cellular access pricing mandated by the 1996 Telecommunications
Act, local service revenues would have grown by 8.9 percent.
- - - A 22 percent increase in private line and special access revenues, which
totaled over $200 million for the first quarter -- a reflection of the
company's growing data networking services business and its ability to
successfully compete in one of the most highly competitive segments of the
telecommunications market.
- - - A 9.2 percent increase in total access revenues to almost $900 million
for the first quarter -- reflecting accelerating dedicated access product
sales, continued growth in switched access minutes of use, and solid access
line growth.
- - - Total revenues from new products and services up nearly 50 percent from
first quarter 1996 to approximately $232 million -- now representing 9.0
percent of total revenues. Total vertical services revenue of approximately
$266 million -- a 21 percent growth over first quarter 1996.
Growth Initiatives:
- - - Data networking services revenues of over $67 million in the quarter --
up 63 percent from the same quarter of 1996.
- - - The successful introduction and initial state rollouts of an innovative,
strongly competitive 1-800 platform calling card product which allows U S WEST
customers to place interLATA and intraLATA calls from anywhere within or
outside of U S WEST's service territory.
- - - The winning bids for 53 PCS licenses in the FCC's D and E block spectrum
auctions. These licenses cover nearly 20 million POPs and the vast majority
of U S WEST Communications' metropolitan service area. U S WEST's
successful bids totaled $57 million for an attractive price of $2.88 per POP.
Costs and Margins:
- - - The third consecutive quarter in which both employee related and total
operating expense growth levels have slowed. The growth in other operating
expenses was primarily attributable to a step up in marketing activity,
principally associated with successful Caller ID and brand enhancement
campaigns.
- - - Employee level reductions of almost 4,000 since first quarter of 1996
which, coupled with strong access line growth, have driven telco employees per
10,000 access lines down 11.5 percent.
- - - The absorption of $20 million of costs in reported total operating
expenses associated with the start-up of out-of-region data networking
services, PCS, and long distance operations. Without these costs, EBITDA
(earnings before interest, taxes, depreciation, and amortization), operating
income and normalized EPS would have increased approximately 6.0 percent, 9.5
percent and 12.9 percent, respectively.
- - - Growth in cash provided by operating activities of 36 percent, or almost
$300 million, and even stronger growth in net cash flow, enabled the company
to reduce its borrowing levels by over $450 million during the quarter.
- - - Expansion of both EBITDA and operating margins to 45.3 percent and 24.9
percent, respectively.
Trujillo added that the company is on plan with where it said it would be
starting into the second quarter of 1997 and he is excited for what is
expected to be a strong year for U S WEST Communications Group, both
operationally and in building for future growth. He also reiterated that as
the year progresses, costs associated with starting up new businesses and
complying with the Telecommunications Act of 1996 will accelerate, dampening
earnings growth in the later quarters.
About U S WEST Communications Group:
U S WEST Communications Group (NYSE: USW) provides telecommunications and
high-speed data networking 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, Inc. 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.
- - ---------------------------------------------------------------
[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) different 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) different than anticipated employee levels, capital
expenditures or operating expenses as a result of unusually rapid, in-region
growth, (iv) the gain or loss of significant customers, (v) pending regulatory
actions in state jurisdictions, and (vi) 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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WWW/USWEST.COM