[U S WEST LOGO]
INVESTOR RELATIONS
January 26, 2000 NEWS FLASH
U S WEST 4th Quarter Earnings Rise 6.4% on Strong New Product Growth
High-Speed Data, Wireless Subscriber Levels Exceed Annual Targets,
Drive Results; Industry-Leading DSL Tops 110,000 Customers;
Advanced PCS Exceeds Half-Million Mark
DENVER - U S WEST (NYSE: USW) today announced fourth quarter diluted earnings
per share of $0.83 on net income of $425 million. EPS rose $0.05 or 6.4 percent.
Full-year EPS grew to $3.23, up 6.3 percent or $0.19 on net income of $1.64
billion.
(All the above numbers are pro forma and normalized for a change to an
industry-standard "point of publication" accounting method that allows U S WEST
Dex, the company's directory publishing unit, to recognize directory revenues
and costs of sale at the time of directory publication.)
Also during the quarter, the company reported that EBITDA (Earnings Before
Interest, Taxes, Depreciation, Amortization and other) grew to $1.45 billion, up
5.3 percent from the fourth quarter of last year.
The company achieved results with fourth quarter revenue growth of 6.3 percent,
driven largely by acceleration of U S WEST's data and wireless products. In
fact, nearly 78 percent of revenue growth for the quarter resulted from these
two growth areas.
"Exceeding our 1999 targets in the emerging data, Internet, wireless and even
video growth areas of our business is a significant milestone for U S WEST,"
said Sol Trujillo, chairman, president and CEO of U S WEST. "Our early success
with these critical future growth engines puts us in prime position to take
advantage of the exploding telecommunications and entertainment markets.
"Continuing to transform U S WEST into a higher growth-oriented vehicle will be
critical as we move closer to completing our merger with Qwest," Trujillo added.
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U S WEST Fourth Quarter Earnings - Page 2
QUARTERTLY Growth Product Highlights
Division Revenues (comparisons are Key Product Subscriber/Penetration Levels
4Q99 over 4Q98)
- - -------- ------------------------- ----------- -----------------------------
Data o $486 million, up o U S WEST.net o Added 73,000 for the quarter.
36 percent
o !NTERPRISE data o MegaBit o Added more than 30,000 for the quarter.
revenues were $252 Services
million, up 61 (DSL)
percent.
PCS o ARPU of $55. o Advanced o Added 122,000 in the quarter, up 52 percent
PCS over 4Q98 additions and more than double the
o Total quarterly additions from 3Q99.
revenue of $78
million, up 71
percent.
Video o ChoiceTV o Have 35,000 video subscribers
& OnLine o 16,000 to ChoiceTV in Phoenix
o 19,000 in Omaha, Neb.
o 20 percent of ChoiceTV customers also opt for
U S WEST Choice Online service.
During the quarter, the company's total "growth subscribers" (customers for the
company's PCS, DSL and Internet access service) were up more than 225,000.
Growth initiatives negatively impacted EPS by $0.27 for the quarter versus $0.18
for fourth quarter, 1998.
For the year, U S WEST added nearly 600,000 "growth subscribers" for its
Advanced PCS, MegaBit, and U S WEST.net services. U S WEST now has nearly
960,000 growth subscribers, surpassing company targets by better than 33 percent
for the year. Investment in growth initiatives negatively impacted EPS by $0.81
for the year versus $0.48 for 1998.
"What is most encouraging about our growth businesses is not just the pure
volume we're generating, but the characteristics of our growth products,"
Trujillo said. "For example, we have aggressively won about 85 percent of the
DSL customers in our region. And the way we've begun bundling products has
improved customer retention and satisfaction, driven increased per-customer
revenue, and helped improve product penetration."
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U S WEST Fourth Quarter Earnings - Page 3
ANNUAL Growth Product Highlights
Division Revenues (comparisons are Key Product Subscriber/Penetration Levels (comparisons
1999 over 1998) are 1999 over 1998)
- - -------- ------------------------- ----------- ------------------------------------------
Data o $1.7 billion, up o U S WEST.net o To date, total 380,000, up almost 230,000 in
34 percent 1999, or 152 percent.
o !NTERPRISE data o MegaBit o Added more than 88,000 during 1999, a
revenues were $847 (DSL) four-fold increase over 1998, bringing the total
million, up 59 services to 110,000.
percent. o USW serves 451 subs. per Central Office, with
244 equipped COs.
o 93 percent of customers self-install.
PCS o Annual ARPU of o Advanced o Added more than 280,000 during 1999 for a
$57. PCS total of more than 465,000 by end of year.
(Topped 500,000 in January 2000)
o Total annual
revenue of $236 o Penetration is now 3.2 percent.
million,
two-and-a-half times o Number two market slot in mature markets.
1998 totals.
o Wireless o 60 percent of users subscribe to at least one
Integrated of the product's integrated features
features
Dex o 1999 E-Commerce o Internet o In 1999, IYP usage up nearly 120 percent.
revenues grew 92 Yellow Pages
percent to more than
$24 million. o Web Site o Sold over 10,000 web sites to businesses in
Service 1999, more than any other web site developer
in U S WEST's 14 states.
Other fourth quarter and year-end highlights include:
Volumes and Penetration:
o Became the most densely penetrated of any DSL provider nationwide, with
more than 10 percent of qualified on-line households taking the service.
o Residential subscriber levels at the end of the quarter for the company's
most popular custom calling features were: Caller ID, 37 percent; Call
Waiting, 36 percent; Voice Messaging, 20 percent.
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U S WEST Fourth Quarter Earnings - Page 4
o In 1999, the company has signed up more than 250,000 customers for several
of its new privacy-related custom-calling features, including Caller ID
with Privacy Plus and No Solicitation.
o Subscribers to the company's bundled Custom Choice package for residential
customers now stand at 1.3 million, more than double the number from fourth
quarter 1998.
o The number of primary rate ISDN lines in service increased 80 percent
during the year. Total ISDN lines grew 23 percent in 1999.
o U S WEST Dex Internet yellow pages volume surpassed the 2.2-million-visit
mark for one month in December.
o Added 408,000 access lines over the past year. On a
"voice-grade-equivalent" basis, business access line growth was 17 percent.
o On the small business side, total access lines equipped with Centrex 21
services grew to 576,000, a 42 percent year-over-year increase.
o During the quarter, the company saw continuing impacts from competition in
its local telephony business in both line growth and pricing. It now has
re-sold nearly 535,000 lines to competitors, up from 382,000 lines at the
end of 1998.
Sales and Revenues:
o Generated $236 million in annual revenue from PCS customers, up more than
two-and-one-half times the 1998 amount. More than 60 percent of Advanced
PCS customers now subscribe to at least one of the company's integrated
features, and these customers are less likely to look for a competitive
offering.
o Frame relay revenues increased by more than 33 percent quarter-over-quarter
and ISDN revenues jumped by 64 percent quarter-over-quarter.
o A 17 percent increase compared with fourth quarter 1998 in private line and
special access revenues, which totaled $316 million -- 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. For the year, private line and special access
revenues were almost $1.2 billion, up 18 percent over 1998.
o During the quarter, consumer revenues from vertical services increased by
14 percent, compared to fourth quarter 1998. Consumer vertical services
revenues grew 15 percent during the year.
o Toll revenues dropped by 40 percent during the quarter.
Costs and Margins:
o Capital expenditures were up 42 percent during the quarter, rising to $1.4
billion. For the year, capital expenditures rose 45 percent to $4.2
billion. The increases have helped bolster service levels for traditional
services and aided in deployment of new services.
o Absorbed approximately $117 million in expenses related to interconnection,
number portability and Year 2000 readiness during the quarter. In total,
the company spent $270 million in expense and capital on Y2K.
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U S WEST Fourth Quarter Earnings - Page 5
o Employee-related expenses grew by 11 percent during the quarter, due in
part with efforts related to keeping up with service demands. These
expenses include a net addition of more than 1,600 employees during the
quarter and nearly 3,800 since in 1999 -- more than 2,000 of which have
been added specifically to keep up with service demands.
During the quarter, the company sold approximately 24 million shares (65 percent
of its holdings) in Global Crossing, Ltd. (NASDAQ: GBLX) at a value of about
$1.14 billion. This sale resulted in an after tax loss of $259 million, or $0.51
per share. Of this amount, $0.44 related to the actual sale of shares. The
remaining $0.07 resulted from the costs of entering into agreements that allow
U S WEST to participate in additional upside appreciation in Global Crossing
stock. Those agreements also have potential downside risk associated with them.
Taken together, these charges reduced U S WEST's quarterly reported normalized
diluted EPS to $0.32.
In other news, U S WEST announced that its annual shareholder meeting will take
place in December 2000. This meeting was originally scheduled for April 20. If
the company's pending merger with Qwest Communications International Inc. closes
as scheduled, U S WEST will not hold an independent annual shareholder meeting.
U S WEST (NYSE: USW) provides a full range of telecommunications and other
services -- including wireline, wireless PCS, data networking, directory and
information services -- to more than 25 million customers nationally and in 14
Western and Midwestern states. More information about U S WEST can be found on
the Internet at http://www.uswest.com.
Safe Harbor Statement: This document contains statements about expected future
events and financial results that are forward-looking and subject to risks and
uncertainties. For these statements, we claim the safe harbor for
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Factors that could cause actual results to differ
from expectations include: (i) greater than anticipated competition from new
entrants into the local exchange, intraLATA toll, wireless, data and directories
markets, causing loss of customers and increased price competition; (ii) changes
in demand for U S WEST's products and services, including optional custom
calling features; (iii) higher than anticipated employee levels, capital
expenditures and operating expenses (such as costs associated with
interconnection); (iv) the loss of significant customers; (v) pending and future
state and federal regulatory changes affecting the telecommunications industry,
including changes that could have an impact on the competitive environment in
the local exchange market; (vi) acceleration of the deployment of additional
services and/or advanced new services to customers, such as broadband data,
wireless and video services, which would require substantial expenditure of
financial and other resources; (vii) a change in economic conditions in the
various markets served by U S WEST's operations; (viii) higher than anticipated
start-up costs associated with new business opportunities; (ix) delays in
U S WEST's ability to begin offering interLATA long-distance services; (x)
consumer acceptance of broadband services, including telephony, data and
wireless services; (xi) delays in the development of anticipated technologies,
or the failure of such technologies to perform according to expectations; and
(xii) timing and completion of the recently announced merger with Qwest
Communications International Inc. and subequent integration of the businesses of
the two companies. These cautionary statements by U S WEST should not be
construed as exhaustive or as any admission regarding the adequacy of
disclosures made by U S WEST. U S WEST cannot always predict or determine after
the fact what factors would cause actual results to differ materially from those
indicated by the forward-looking statements or other statements. In addition,
readers are urged to consider statements that include the terms "believes",
"belief", "expects", "plans", "objectives", "anticipates", "intends", "targets",
or the like to be uncertain and forward-looking. All cautionary statements
should be read as being applicable to all forward-looking statements wherever
they appear. U S WEST does not undertake any obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.
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For information: Larry Thede, 303-896-3550; Martha Daniele Paine, 303-896-5706;
Kent Evans, 303-896-3096.
NOTE: This release and the financial statements will be available on the
Internet after 7:15 a.m. (MST) by accessing U S WEST's Internet site:
www.uswest.com.