EXHIBIT 99A
U S WEST Communications, Inc.
1801 California Street
Denver, Colorado 80202
[U S WEST Communications, Inc. logo and registered mark]
News Release
Release Date: July 25, 1997
Contact: Dave Banks, 303/896-3040
U S WEST COMMUNICATIONS REPORTS
EARNINGS PER SHARE GAIN OF 6.6 PERCENT
- PENDING REGULATORY ITEMS IMPACT REVENUES; COST CONTROLS CONTINUE -
ENGLEWOOD, Colo. -- U S WEST Communications Group (NYSE: USW) today reported
another quarter of strong earnings growth. Results were driven by a strong
balance of revenue production and aggressive cost reductions. The company
achieved this while launching new marketing initiatives; absorbing costs
related to growth; and expending almost $85 million year-to-date for mandated
interconnection to help foster local competition.
Normalized net income for the quarter increased 8.7 percent to $314 million
from $289 million in second quarter 1996. Normalized earnings per share grew
to $0.65 for the quarter, up 6.6 percent from the $0.61 reported in second
quarter 1996. Results for the quarter were normalized for an $18 million
one-time, after-tax gain associated with the sale of selected rural exchanges
in Idaho, Iowa and South Dakota. Results for second quarter, 1996 were
normalized to reflect the effects of a change in accounting principle and to
reflect a $30 million one-time, after-tax gain associated with the sale of
selected rural exchanges in the Dakotas.
"Investors and customers should be pleased with what the people of U S WEST
Communications have accomplished," said Richard McCormick, chairman and chief
executive officer of U S WEST, Inc. "They're meeting their financial
commitments to investors, while dramatically improving service levels, gearing
up for new growth initiatives, and meeting federal and state mandates related
to introducing competition in their local markets."
"We had a very solid quarter, primarily because our expense controls have
started to gain traction," said Sol Trujillo, president and chief executive
officer of U S WEST Communications Group. "This is our fourth consecutive
quarter of moderating expense growth, and we believe the run-rate impact of
what we've put into place in our core operations is sustainable."
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Trujillo said quarterly results were diluted by pending regulatory items and
also by the beginning of some significant spending relative to
interconnection. Although revenues are slightly below plan, Trujillo said
they are still showing strong core growth, and he expects improvement in the
second half with a number of marketing initiatives now in place or set to roll
out. Revenues have also been impacted by intraLATA toll losses.
Second quarter highlights include:
Volumes and Penetration:
- - -The addition of 686,000 access lines (adjusted for the sale 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 6.8 percent;
residential access lines grew at 3.6 percent; and residential additional lines
grew at nearly 27 percent, reaching a second-line penetration level of 12.2
percent.
- - -Residential penetration levels for the company's most popular custom calling
features reached all-time highs: Caller ID, 27.7 percent; Voice Messaging,
17.5 percent; and Call Waiting, 38.9 percent. A highly successful first
quarter Caller ID campaign contributed approximately $4 million in recurring
monthly revenues during the second quarter.
- - -The successful launch of National Directory Assistance in Colorado and New
Mexico. National DA allows customers to obtain phone numbers anywhere in the
U. S. simply by calling 1-411. In the first two months of deployment, the
product generated 250 percent of expected call volume. It has taken almost 20
percent of the share of National directory assistance calls originating in
those markets, and will roll out in the remainder of the territory in 3rd and
4th quarter.
- - -An increase of 9.5 percent in customer order volumes year-to-date versus the
first half of 1996, including orders for new services, transfers, and changes.
- - -The company has sold more than 165,000 Home Receptionist and Business
Receptionist Screen Phones, making it the industry leader in that product.
These phones visually and functionally integrate a number of custom calling
services, and increase the penetration of these vertical services.
Sales and Revenues:
- - -Adjusting for a number of items, local service revenue growth was 6.4
percent, with almost half the growth driven by the sales of vertical services.
Total revenue growth, adjusted for these same items, was 4.6 percent.
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-A 19 percent increase in private line and special access revenues, which
totaled over $200 million for the second 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.
- - -Total new product and services revenues are up more than 35 percent from
second quarter 1996 to over $280 million. Those revenues now represent 11
percent of total revenues.
Growth Initiatives:
- - -Final regulatory approval of the company's wireless PCS licenses to cover
nearly 20 million POPs throughout the region. The company plans to deploy
services in Denver in the Fall and at least one other market by the end of the
year.
- - -Rollout of the U S WEST Express Calling Card throughout the company's region.
Through a special partnering arrangement with Frontier Communications, this
1-800 calling card allows customers to make both interLATA and intraLATA calls
cost effectively nationwide. More than 2.9 million cards have been
distributed to date.
- - -Data networking services revenues of more than $75 million in the quarter --
up 48 percent from the same period in 1996.
Costs and Margins:
- - -Absorbed approximately $40 million year-to-date in expenses and approximately
$45 million year-to-date in capital related to interconnection. The company
expects to significantly increase its spending on interconnection for the
balance of 1997. U S WEST Communications now has 250 agreements throughout
its 14-state region with competitive local exchange carriers.
- - -The fourth consecutive quarter in which both employee related and total
operating expense growth have slowed.
- - -Employee year-over-year reductions, coupled with strong access line growth,
have driven telco employees per 10,000 access lines down 11.3 percent to 28.4.
- - -Growth in cash provided by operating activities of 40 percent, or almost $573
million, and even stronger growth in net cash flow, enabled the company to
reduce its borrowing levels by over $710 million during the first half of
1997.
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Trujillo added that the company is on plan with its 1997 earnings and
operational objectives. He 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
later quarters.
U S WEST Communications (NYSE: USW) provides telecommunications and 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, a company 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, is involved in
domestic and international cable and telephony, wireless communications, and
directory and information 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) 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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NOTE: THIS RELEASE AND THE FINANCIAL STATEMENTS WILL BE AVAILABLE ON THE
INTERNET AFTER 8:00 A.M. (MDT) BY ACCESSING U S WEST'S INTERNET SITE:
WWW.USWEST.COM