U S WEST
Investor Relations
NEWS FLASH
July 27, 1998
Note to investors: U S WEST (NYSE: USW) will hold a live
teleconference call at 2:30 p.m. MDT (4:30 p.m. EDT) today to
discuss second quarter, 1998 results. President and CEO, Sol
Trujillo, will host the call. Those wishing to participate
should call 1-800-946-0712 by the scheduled start time. It will
be available for re-broadcast from 3:30 p.m. MDT today through 5
p.m. MDT on Wednesday, Aug. 5 by calling 1-888-821-9353.
U S WEST POSTS EPS GROWTH OF 7 PERCENT IN SECOND QUARTER -
Results driven by strong core telecommunications business,
plus addition of Dex directory publishing -
ENGLEWOOD, Colo. - U S WEST (NYSE: USW) today announced second
quarter normalized, diluted earnings per share of $.76, up 7
percent from second quarter, 1997. These are the new U S WEST's
first quarterly earnings since its June 12 split from MediaOne
Group (NYSE: UMG). That transaction resulted in the transfer of
U S WEST Dex, the company's directory publishing business, from
MediaOne Group to U S WEST. [Note: Net income and EPS figures
used in this release are pro-forma and include full-quarter and
year-to-date, 1997 and 1998 impacts from the U S WEST Dex
transaction.]
Results were driven by strong revenue growth of nearly 8 percent.
Adjusting for a $72 million out-of-period regulatory impact from
second quarter, 1997, revenue growth would have been 5.2 percent.
These improving revenue results show the early impacts from the
company's new data and wireless growth businesses.
"We're pleased with these results," said Sol Trujillo, president
and CEO of U S WEST. "We're on plan and doing better than expectations.
Local service revenues are very strong; the growth platforms we're
building are performing well; productivity continues to improve;
and our efforts to build our ATM and IP-centric networks are moving
along nicely."
Some key quarterly highlights included:
o Local service revenue growth of 14.7 percent prior to
adjustments.
o Revenue growth from the company's data division,
!NTERPRISE, of 42 percent for the quarter to $120 million from
the same period in 1997.
- more -
U S WEST Second Quarter Earnings - Page 2
o Rollout of the company's first-in-the-nation, one-number
Advanced PCS service in its fifth major market. The service is
now available to 10 million POPs.
o An improvement in revenue per sales representative per day of 42
percent and of revenue per order of 20 percent on the business
sales channel. On the consumer side, revenue per sales representative
per day was up 47 percent and revenue per order was up 13 percent.
o We've more than doubled the number of ATM switches in our network.
ATM provides advanced capabilities for carrying data traffic.
o An increase of 14 percent in the total number of Frame Relay ports in
service to 53,400. With its strategic ally, Intermedia Communications,
U S WEST customers have access to the largest Frame Relay switching
network in the country.
The company achieved the EPS growth while absorbing significant costs related to
expansion of new growth businesses, and expenses associated with mandated
interconnection and number portability, and year 2000 expenses.
U S WEST's healthy core business was boosted by a Caller ID campaign. This
campaign, combined with a similar promotion during first quarter has helped
increase net residential subscriber levels by nearly one million since second
quarter, 1997.
Additionally, the company filed for price cap regulation in Iowa during the
quarter, and expects a commission ruling on its Minnesota filing soon. A similar
plan is still pending in Colorado. If approved in these three states, a total of
nine of the company's 14 states would be under price regulation.
During the quarter, the company saw continuing impacts from competition in its
local telephony business. It now has re-sold almost 171,000 lines to
competitors.
Results for the quarter were partially offset by previously announced one-time
after-tax charges of $89 million related primarily to the split from MediaOne
Group. EPS for the quarter was reported at $.59 including the impacts of these
charges.
Other second quarter highlights include:
New Product Initiatives:
o The company neared completion of the first phase of the wide-scale commercial
deployment of its MegaBit high-speed digital subscriber line data services in 11
states and 31 cities throughout its region, including the Phoenix, Denver,
Minneapolis/St. Paul, Salt Lake City and Seattle metro areas. In Oregon, the
company plans to offer the service in five cities beginning in mid-August.
- more -
U S WEST Second Quarter Earnings - Page 3
o Rollout of the company's Advanced PCS service in two additional markets
- Tucson, Ariz. (April 6) and Minneapolis (July 16) - bringing to 10
million (about 40 percent of the population in U S WEST's 14 states) the
total number of POPs the company can reach with its one-number wireless
service. In mid-July, U S WEST also introduced two new services to its PCS
line to further integrate its wireless and wireline services. A new dialtone
feature allows the phone to work just like a landline phone, and data mail
allows subscribers to send or receive text messages similar to alphanumeric
pagers.
o The company signed up some 30,000 customers in its "Buyer's Advantage"
program through its marketing alliance with Qwest. Though currently
prohibited from expanding this base, this special long-distance plan
enhanced the company's integrated customer-service portfolio. Additionally
the company now has interstate long-distance filings in place in four states
Montana, New Mexico, Nebraska and Wyoming.
o In April, the company announced plans to roll out its VDSL video services in
Phoenix by the end of the year.
Volumes and Penetration:
o More than 360,000 customers have signed up for the company's new "Custom
Choice" package since its inception in February (200,000 alone in the
second quarter). It generated approximately $3 million in incremental
revenues during the quarter. Custom Choice combines U S WEST's most
popular custom calling features into a discounted package, increasing
penetration of these features.
o Residential penetration levels at the end of the quarter for the company's
most popular custom calling features continued to grow: Caller ID, 33
percent, Voice Messaging, 18 percent (industry leader) and Call Waiting,
36 percent.
o The addition of 656,000 access lines (adjusted for the sales of selected
rural exchanges) over the past 12 months for a normalized growth rate of
4.2 percent. On an adjusted basis, business access lines grew at 4.6
percent; residential access lines grew at 4.0 percent; and residential
additional lines grew 24.6 percent, reaching a second-line penetration
level of 15.0 percent. Special access services growth was 21.2 percent
year-over-year. On a "voice-grade-equivalent" basis, access line growth was
9.3 percent.
o On the small business side, the number of total access lines equipped with
Centrex service increased by 56.3 percent year over year to nearly 1.3
million.
- more -
U S WEST Second Quarter Earnings - Page 4
Sales and Revenues:
o Local service revenues continued at a strong growth clip, rising by 14.7
percent year over year (8.1 percent on an adjusted basis). Local
service revenues on the consumer side were up 17.6 percent (almost 11
percent on an adjusted basis).
o A revenue increase of 5.7 percent from Dex.
o Revenue from U S WEST's data group, !NTERPRISE, grew 42 percent this quarter
to $120 million. Part of this growth can be attributed to the successful
launch of U S WEST's Internet access service, U S WEST.net. The product is
now available in 42 cities, including: Albuquerque, N.M.; Denver;
Minneapolis; Omaha, Neb.; Phoenix; Portland, Ore.; Salt Lake City; and
Seattle with plans for 11 additional market introductions in the third
quarter.
o A 21.5 percent increase in private line and special access revenues, which
totaled $245 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.
Costs and Margins:
o Absorbed approximately $66 million in expenses and approximately $73 million
in capital related to interconnection and number portability.
o Absorbed $19 million in Year 2000 expenses during the quarter.
U S WEST (NYSE: USW) provides a full range of telecommunications 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 those statements, we claim the protection of the safe harbor
for forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995. Discussion of factors that may affect future results is
contained in our recent filings with the Securities and Exchange Commission.
###
Further information: Larry Thede, 303-896-3550; Rodney Miller,
303-896-3096; Hadley Evans, 303-896-5706.
NOTE: This release and the financial statements will be available on the
Internet after 11:30 a.m. (MDT) by accessing U S WEST's Internet site:
www.uswest.com.