[U S WEST LOGO]
Investor Relations
NEWS FLASH
October 21, 1998
- - --------------------------------------------------------------------------------
Note to investors: U S WEST (NYSE: USW) will hold a live teleconference call at
9:00 a.m. MDT (11:00 a.m. EDT) today to discuss third quarter, 1998 results.
Participants should call 1-800-946-0712 by the scheduled start time. A replay
will be available starting at noon MDT, through 6 p.m. MDT on Wednesday, Oct. 28
by calling 1-888-707-8792.
- - --------------------------------------------------------------------------------
U S WEST CONTINUES EARNINGS GROWTH DURING THIRD QUARTER, 1998
-- Company Surpasses 100,000 Mark for PCS Subscribers During Quarter;
Results Reflect Strong Demand in Core Business and New Data and
Wireless Products;
Earnings on Target Despite 2-Week Work Stoppage During Quarter --
DENVER - U S WEST (NYSE: USW) today announced third quarter, diluted earnings
per share of $.75, up 4.2 percent from pro-forma, normalized third quarter, 1997
earnings. [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 continued double-digit earnings growth in the core
communications business. Results were offset by the company's growth initiatives
- - - PCS, data and video - which, for now, are dilutive. The company released
first-year-in-market figures for several of its new wireless and data products,
for which Inter@ctive Week and NetWorld+Interop today named U S WEST the year's
"Most Innovative Local Exchange Carrier":
- During the quarter, the company's Advanced PCS wireless product reached a
significant milestone, with first-year-in-market subscriber levels reaching
104,000, following its September 1997 launch. About 50 percent of
subscribers are taking advantage of the first-in-the-nation integrated
features. Although U S WEST has been the sixth entrant in all of its
markets, Advanced PCS exceeded the industry benchmark of 1 percent
penetration in its first full year of operation. Yesterday, the company
launched the product in its sixth major market - Seattle (including the
entire Puget Sound area) - with innovative Internet text messaging and
wireless dialtone features also available in other U S WEST Advanced PCS
markets.
Advanced PCS now reaches 13.5 million POPs in U S WEST's region.
- The company's Internet access service, U S WEST.net - approaching its
first year in market - recently exceeded the 70,000-subscriber level.
During the quarter, the company completed its 45-city, 14-state deployment
of the service, which began in October 1997. Last week U S WEST introduced
worldwide access for its U S WEST.net customers.
- more -
U S WEST Third Quarter Earnings - Page 2
- U S WEST expanded availability during the quarter for MegaBit Services,
its high-speed ADSL (Asymmetric Digital Subscriber Line) data offering,
which began rolling out across the region in May 1998. The September
completion of the ADSL rollout followed a pilot deployment of an earlier
version of the technology in Phoenix late last year. Central offices now
equipped with this next-generation data service reach about 5.5 million
lines in more than 40 cities. By year-end 1998, the company projects it
will have between 20,000 and 25,000 customers, more than double the August
1998 projection of U S WEST customers by Forrester Research and near the
total projection for 1998 by Forrester and The Yankee Group for the entire
local telecommunications sector.
- The company continued ramping up for a late-1998 offering of its Choice
TV and OnLine VDSL (Very-high-speed Digital Subscriber Line) service in
Phoenix. VDSL enables delivery of Internet access and cable-like video
services over copper wire to a television or computer.
"We met our financial commitments for the quarter and we're well positioned to
capture new revenue streams in the future," said Sol Trujillo, president and CEO
of U S WEST. "Our growth initiatives - particularly our wireless and data
offerings - have really taken off. Despite a two-week work stoppage, our local
revenue growth is steady, and we continue to rapidly build our ATM and IP
networks."
Trujillo acknowledged that the work stoppage did affect U S WEST's ability to
provide new service to customers, but the company has caught up with most of the
backlog. CWA approved the new contract on Oct. 9, with nearly 70 percent
approval.
"In the end, the company achieved its objectives in the bargaining process,"
said Trujillo. "This landmark agreement not only includes a solid wage package
for our employees, it possesses a ground-breaking pay-for-performance bonus plan
for more than 7,000 customer service operations technicians. It also includes an
important benchmark healthcare plan and call monitoring and recording
enhancements. Ultimately, these changes will benefit both our customers and
shareholders by improving productivity and service."
The company's 1995 labor agreement with CWA introduced the pay-for-performance
concept with sales employees. Today, more than 85 percent of those employees
take advantage of that voluntary program, and from 1995 to 1997 productivity
among these sales employees rose between 24-36 percent in measures such as calls
per rep per day and revenue per rep per day.
The company achieved its third quarter results while absorbing significant costs
related to expansion of new growth businesses, expenses associated with mandated
interconnection and number portability, and Year 2000 expenses.
During the quarter, the company saw continuing impacts from competition in its
local telephony business. It now has re-sold more than 205,000 lines to
competitors.
- more -
U S WEST Third Quarter Earnings - Page 3
During the quarter, the Iowa Utilities Board approved a three-year price plan in
which the company agreed to cap certain rates, and which allowed U S WEST to be
more competitive and streamlined in its new product introductions. Iowa becomes
the seventh among U S WEST's 14 states to adopt some form of regulation based on
price, not rate of return.
Other third quarter highlights include:
Volumes and Penetration:
- The number of searches conducted on the U S WEST Dex Internet Yellow
Pages grew by 126 percent, compared to third quarter 1997. In addition,
independent market research indicates that this usage is meaningful
traffic, which truly links buyers and sellers. In Denver, for instance,
this research shows that more consumers use the Dex Internet Yellow Pages
to actually follow up and contact merchants and make purchases than any
other Internet Yellow Pages or local city guide site. Dex also began
selling Web site design and local Internet banner advertising packages to
small businesses, and is seeing strong sales results. In the first 90 days
of sales, nearly 1,000 small businesses have purchased web site design from
U S WEST Dex.
- Residential penetration levels at the end of the quarter for the
company's most popular custom calling features remained strong: Caller ID,
33.6 percent, Voice Messaging, 18.5 percent (tops in the industry) and
Call Waiting, 35.7 percent.
- The addition of 584,000 access lines (adjusted for the sales of selected
rural exchanges) over the past 12 months for a normalized growth rate of
3.7 percent. The company said some of the slowdown in this growth rate for
the quarter is attributable to the work stoppage. On an adjusted basis,
business access lines grew at 3.9 percent; residential access lines grew at
3.6 percent; and residential additional lines grew 19.4 percent, reaching a
penetration level of 15.2 percent. Special access services growth was 29.9
percent year-over-year. On a "voice-grade-equivalent" basis, access line
growth was 9.4 percent.
- On the small business side, total access lines equipped with Centrex
services grew to nearly 1.4 million, a 50 percent year-over-year increase.
Sales and Revenues:
- Local service revenues rose by 6.4 percent year over year. Local service
revenues on the consumer side were up 8.7 percent.
- Published revenue growth for U S WEST Dex was 7.1 percent year over year.
- Revenues from vertical services increased by nearly 10 percent for the
quarter.
- Revenue from U S WEST's data group, !NTERPRISE, grew 51 percent this
quarter to $140 million.
- more -
U S WEST Third Quarter Earnings - Page 4
- A 19 percent increase in private line and special access revenues, which
totaled $257 million for the third 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:
- Absorbed approximately $60 million in incremental expenses related to
interconnection, number portability and Year 2000 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. 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;
(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 (such as costs associated with year
2000 remediation); (iv) the loss of significant customers; (v) pending
regulatory actions in state jurisdictions; (vi) regulatory changes affecting the
telecommunications industry, including changes that could have an impact on the
competitive environment in the local exchange market; (vii) a change in economic
conditions in the various markets served by the Company's operations that could
adversely affect the level of demand for telephone, wireless, directories or
other services offered by the Company; (viii) greater than anticipated
competitive activity requiring new pricing for services; (ix) higher than
anticipated start-up costs associated with new business opportunities; (x)
increases in fraudulent activity with respect to wireless services; (xi) delays
in the Company's ability to begin offering interLATA long-distance services;
(xii) consumer acceptance of broadband services, including telephony, data, and
wireless services; or (xiii) delays in the development of anticipated
technologies, or the failure of such technologies to perform according to
expectations.]
###
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 7 a.m. (MDT) by accessing U S WEST's Internet site:
www.uswest.com.