July 23, 1999
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Note to investors: Sol Trujillo, Chairman, President and CEO of U S WEST (NYSE:
USW), will host a live teleconference call at 9:00a.m. MDT (11:00 a.m. EDT)
today to discuss second quarter, 1999 results. U.S. participants should call
1-800-967-7141 by the scheduled start time. International callers should dial
719-457-2630. A replay will be available starting at noon MDT, through 6p.m. MDT
on Friday, July 30 by calling 1-888-203-1112 and enter-ing confirmation number
726120. International callers can reach the replay at 719-457-0820.
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U S WEST Second Quarter Earnings Rise 9.2 Percent
-- PCS Subscribers Up Five Fold Year Over Year;
Surpasses 50,000 DSL Subscribers --
DENVER - Riding a near 7 percent revenue growth rate, U S WEST (NYSE: USW) today
announced second quarter diluted earnings per share of $.83, up $.07 or 9.2
percent from pro forma, normalized second quarter 1998 earnings.
Revenue growth increased to 6.7 percent during the quarter, driven primarily by
the continued momentum of the company's growth products: PCS, data and
Internet-related services. Also aiding the quarter's results were moderating
growth in expenses, which fell to a normalized rate of 7.3 percent, from a first
quarter growth rate of 8.9 percent. Quarterly results were partially offset by
increasing investment in growth areas.
As announced earlier this week, U S WEST has entered into a merger agreement
with Qwest Communications International.
"We had an exciting quarter at U S WEST," said Sol Trujillo, president and CEO.
"In addition to announcing our merger with Qwest, we've also announced quarterly
results that show clear operational momentum. And the strength of those results
underscores our desire to link up with a partner that can help broaden the scale
and scope of our offerings.
"I'm particularly pleased with the progress of our growth initiatives," he
added. "Those initiatives -- coupled with quarterly sales of nearly 250,000
additional Caller ID and voice messaging features -- are now driving much of the
revenue growth in our business."
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U S WEST Second Quarter Earnings - Page 2
The following are key product and service highlights from U S WEST's growth
businesses:
Growth Product Highlights
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Division Revenues (comparisons are Key Product Subscriber/Penetration Levels
Q299 over Q298)
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Data o $410 million, up 37 o U S o To date, total of 225,000, up almost
percent WEST.net 23,000 for the quarter and 380 percent
over 2Q98 totals.
o !NTERPRISE data
revenues were $203 o MegaBit o Added nearly 14,000 for the quarter.
million for the (DSL) To date at 50,000 total.
quar-ter, up 67 percent. services
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PCS o ARPU of $58. o Advanced o Added nearly 65,000 during the
PCS quarter for a total of almost 285,000.
o Total quarterly
revenue of $57 o Now has a weighted average
million, up 250 percent. penetration of 2.2 percent.
o 50 percent of users now subscribe to
o at least one of the product's integrated
Integrated features
features
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Dex o E-Commerce-related o Internet o Has sold web sites to nearly 6,000
revenues grew to nearly Yellow Pages small businesses since the service was
$5 million. introduced in 1998.
o Represents a 53 o
percent increase in E-Commerce o Year to date, Dex has sold nearly
Internet, audio and 21,000 Internet advertising items, which
database marketing also include Web site and e-mail links
services. and local banner ads.
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Total "growth subscribers" (customers for the company's PCS, DSL and Internet
access service) were up more than 100,000 for the quarter -- almost double
second quarter 1998 -- and now total 550,000. Investment in growth initiatives
negatively impacted EPS by $0.17 for the quarter versus $0.10 for second
quarter, 1998.
U S WEST Dex, the company's directory and Internet Yellow Pages business,
continued its strong performance in the second quarter, with double-digit net
income growth. Dex grew revenues at 7.4 percent compared to second quarter last
year, led by top-line growth in Internet advertising and audio services as well
as healthy print Yellow Pages results. Additionally, the company's Internet
Yellow Pages site (http://uswestdex.com) experienced tremendous usage growth
during the quarter, up more than 23 percent over the first quarter.
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U S WEST Second Quarter Earnings - Page 3
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 475,000 lines to competitors, up from 444,000 lines at the end of first
quarter.
During the quarter, U S WEST announced an agreement to sell 530,000 (about 3
percent of its total access lines) access lines throughout its region to
Citizen's Utilities.
Other second quarter highlights include:
Volumes and Penetration:
o Residential subscriber levels at the end of the quarter for the company's
most popular custom calling features continued to grow, with Caller ID and
Call Waiting both now at 37 percent penetration and Voice Messaging now at
20 percent penetration (tops in the industry).
o So far this year, the company has signed up 120,000 customers -- most of
them during the second quarter -- for several of its new privacy-related
custom-calling features, including Caller ID with Privacy Plus and No
Solicitation.
o Sales of the company's bundled "Custom Choice" package for residential
customers surpassed 910,000 during the quarter.
o The addition of 510,000 access lines over the past 12 months for a growth
rate of 3.1 percent. On a "voice-grade-equivalent" basis, business access
line growth was 14.2 percent.
o On the small business side, total access lines equipped with Centrex 21
services grew to 492,000, a 63 percent year-over-year increase.
Sales and Revenues:
o An 18.8 percent increase compared with second quarter 1998 in private line
and special access revenues, which totaled $291 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.
o During the quarter, consumer revenues from vertical services increased by
more than 17 percent, compared to second quarter 1998.
o Frame Relay revenues increased by nearly 38 percent quarter-over-quarter
and ISDN revenues jumped by 73 percent quarter-over-quarter.
o Toll revenues dropped by 22 percent during the quarter, driven partially by
five states moving to 1+ pre-subscription during the first quarter and Iowa
moving to 1+ pre-subscription in April.
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U S WEST Second Quarter Earnings - Page 4
Costs and Margins:
o Absorbed approximately $117 million in expenses related to interconnection,
number portability and Year 2000 compliance during the quarter. To date,
the company has spent $200 million in expense and capital on Y2K. It
expects to spend another $75 million during the balance of 1999.
o Capital expenditures were up 21 percent during the second quarter, rising
from $809 million in second quarter to $981 million this quarter. For the
year, capital expenditures are up 33 percent at $1.8 billion. Full-year
capital expenditures are now expected to be approximately $4.0 billion.
o Employee-related expenses grew by 7.9 percent during the quarter, due in
large part to efforts related to keeping up with service demands. These
expenses include the addition of 400 employees during the quarter and
nearly 2,200 since second quarter, 1998 -- more than 1,100 of which have
been added specifically to keep up with service demands.
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 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 and year 2000 remediation); (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) a change in
economic conditions in the various markets served by U S WEST's operations;
(vii) higher than anticipated start-up costs associated with new business
opportunities; (viii) delays in U S WEST's ability to begin offering interLATA
long-distance services; (ix) consumer acceptance of broadband services,
including telephony, data and wireless services; (x) delays in the development
of anticipated technologies, or the failure of such technologies to perform
according to expectations; and (xi) timing and completion of the recently
announced merger with Qwest Communications International Inc. 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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Further 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 a.m. (MDT) by accessing U S WEST's Internet site:
www.uswest.com.