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EXHIBIT 99
PRESS RELEASE
OCTOBER 25, 2000
WILLIAMS COMMUNICATIONS' STRONG NETWORK EXECUTION DRIVES RECORD THIRD QUARTER
REVENUE
TULSA, Okla. - Williams Communications Group, Inc. (NYSE:WCG) today reported
record unaudited third-quarter revenues of $533.8 million, including record
network services revenue of $178.2 million. Recurring domestic network services
revenue, which excludes dark fiber sales and revenue from PowerTel, increased 32
percent compared with the second quarter of 2000 and 121 percent from the third
quarter of 1999. This significant improvement was driven by record usage of
fiber-optic capacity on Williams' next-generation long-distance network as it
approaches completion at the end of 2000.
Consolidated EBITDA in the third quarter improved substantially to a $16.9
million loss, compared with a $33.6 million loss in the second quarter of 2000.
Net loss available to common stockholders on a consolidated basis was $150.5
million or 32 cents per share.
"Williams Communications is successfully executing and delivering on our plan to
provide the most efficient, innovative, scalable network services in North
America - a full year ahead of schedule," said Howard E. Janzen, president and
chief executive officer of Williams Communications. "Our customers recognize
Williams' commitment to execute and deliver unparalleled broadband capacity,
superior customer service and local-to-global network reach.
"By outsourcing to Williams, service providers gain the reliability, flexibility
and scalability of our highly-efficient, all-optical network and reduce their
overall capital costs," Janzen said. "With our stable anchor tenants and the
exploding IP market, Williams differentiates itself from competitors and is best
positioned to capitalize on this tremendous momentum. Our level of success in
both attracting new customers and meeting growing demand from existing customers
is a commanding endorsement of our unique carrier-enabler focus."
EXECUTION OF CARRIER-ENABLER STRATEGY DRIVES CONTINUED GROWTH IN DIVERSE
CUSTOMER BASE
"Continued execution of our focused strategy has attracted a broad portfolio of
diversified customers - from well-known communications companies such as SBC
Communications, KDDI America, Inc. and UUNET, to large media companies such as
FOX, to profitable and growing broadband-intensive enterprises," Janzen said.
"Williams Communications has generated an estimated $3 billion in new network
business so far this year and met increasing demands from established customers
to carry more of their voice, data and video traffic on our network."
Williams has more than doubled its network customer base to 177 data and voice
customers during the year, with 19 percent growth in the past three months.
Contracts announced in the third quarter included MariTEL, Dominion Telecom,
Epoch Internet, Axient Communications, Telepak Networks Inc., PowerCom Energy &
Communications Access, and Hostcentric.
The stability and durability of this diverse customer base was underscored in
July when SBC Communications began offering long-distance service in Texas using
the Williams network. By Oct. 18, more than a million customers had subscribed
to Southwestern Bell Long Distance service in Texas. The Williams network is
also providing long-haul transport services and connectivity for voice, wireless
and data products in support of SBC's aggressive national expansion plans.
In early October, two additional state commissions, Kansas and Oklahoma,
recommended that SBC be permitted to offer long-distance services to their
residents. SBC plans to file long-distance applications with the Federal
Communications Commission for each state soon; the commission then has 90 days
to act on each application. SBC expects to gain approval to enter the
long-distance markets in all of the remaining Southwestern Bell states
(Missouri, Oklahoma, Kansas and Arkansas) in the first quarter next year and in
California and Nevada by the end of the first half of 2001.
"We are prepared to support SBC's future long-distance plans as it receives
regulatory approval in other states in its traditional service region," Janzen
said. "As a result of our very close working relationship and strategic
alliance, we have been able to scale our network to meet SBC's needs generated
by its unparalleled success in acquiring customers."
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EXECUTION OF NETWORK BUILD REMAINS FULL YEAR AHEAD OF SCHEDULE
Construction of Williams' domestic inter-city network remains one year ahead of
the original schedule, with 33,000 route miles connecting 125 cities due to be
complete by year-end 2000. Through September, Williams has 30,500 route miles of
installed fiber-optic cable and more than 1.3 million square feet of data center
space, bringing the company closer to its goal of 2 million square feet.
Extending its local-to-global reach, Williams Communications began operating
capacity on the China-United States undersea cable system and began backhauling
data traffic to the U.S. west coast for top Asian service providers, including
KDDI America, the largest Internet provider in Japan.
Williams Communications continues to be recognized for the most innovative
network architecture in the industry, having received SuperComm's award for all
three years it has been presented. In the third quarter, Inter@ctive Week and
The Net Economy selected Williams Communications as the best backbone network
for pioneering the use of optical networking equipment.
OPERATIONAL EXECUTION ACCELERATES LIT CAPACITY
"With 27,000 route miles lit, Williams Communications is on track to be the
nation's most efficient, cost-effective broadband network," said Frank Semple,
president of the Williams Network. The company turned up a four-fold increase in
the total number of circuits in the first nine months. Optical circuits grew 200
percent. Capacity on the Williams Multi-Service Broadband Network(TM) now totals
12 billion voice grade-equivalent miles. Construction to extend the edges of the
Williams network directly to carrier customers is substantially complete in 11
cities, with 34 cities targeted for completion by the end of 2001 and 50 cities
by the end of 2002.
Williams Communications continues to test and deploy the latest optical
switching technology to lower its network equipment and operating costs. The
company completed certification of a third optical vendor: Ciena Corporation's
intelligent optical switch will enable Williams to turn up services faster over
a simpler, smarter network. A field trial of equipment developed by Corvis
Corporation continued during the quarter with the longest all-optical
terrestrial communications transmission in history. The test should be complete
early in the fourth quarter. With existing agreements from Nortel Networks and
Sycamore, these additional optical equipment sources typify Williams'
multi-vendor strategy.
"Through our unique Technology Farm System, Williams continues to test and
deploy leading-edge optical technologies that split the spectrum of light to
increase capacity and improve quality of service," said Matthew Bross, chief
technology officer. "By combining these emerging technologies with our
industry-leading ability to expand and provision customer demand for recurring
capacity, Williams is executing on its stated strategy to drive network
utilization and accelerate the decline in unit costs."
FINANCIAL HIGHLIGHTS FOR THE THIRD QUARTER
Consolidated revenue for the third quarter of $533.8 million was $18.7 million
greater than the second quarter of 2000 and $35.5 million more than the prior
year. All of the increase can be attributed to record recurring network services
revenue. Partially offsetting increased revenues were lower one-time dark fiber
sales due to timing and lower Solutions sales consistent with trends in that
industry.
Consolidated EBITDA was a loss of $16.9 million and included $50.7 million of
cash gains from the sales of investments. The company reported a net loss
available to common stockholders for the third quarter of $150.5 million, or 32
cents per share. This compares with a net loss of $3.9 million in the second
quarter, which included a $132.6 million after-tax gain associated with XO
Communications, Inc.'s purchase of Concentric Network Corporation.
Revenues of $178.2 million from the Network unit increased $32.6 million versus
the second quarter. The increase is due to recurring network services revenue,
which rose $41.2 million, or 32 percent versus the prior quarter, consisting
mostly of U.S. data and voice services. Partially offsetting the increase was a
$9.0 million reduction in dark fiber sales resulting from the timing of project
closings moving into the fourth quarter. PowerTel revenue remained essentially
unchanged at $4.5 million.
Network EBITDA for the third quarter was a loss of $1.3 million compared with a
loss of $10.6 million in the second quarter. The improvement resulted from the
positive EBITDA contribution associated with the
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increased revenues, partially offset by the increased costs of completing and
operating the expanded network. Higher cash gains from the sale of technology
company investments during the quarter were partially offset by the lower dark
fiber sales.
The Broadband Media segment reported third-quarter revenue and EBITDA results of
$40.0 million and a loss of $2.5 million, respectively. This was slightly below
second quarter results reflecting the seasonality of this business.
Revenue for the Solutions unit was $329.1 million compared with second-quarter
revenue of $339.3 million, reflecting lower sales activity consistent with voice
equipment industry trends. Solutions' EBITDA for the quarter was a loss of $11.9
million compared with a loss of $22.3 million in the second quarter, primarily
due to the absence of bad debt reserve adjustments and lower SG&A expenses.
Capital expenditures for the quarter were $1.1 billion, largely related to the
network build-out. Included in this total was the acquisition of SBC's interest
in the long-distance assets of Ameritech Communications, Inc. and $51.4 million
of capitalized interest.
During the third quarter, Williams Communications successfully completed the
sales of $1 billion of senior redeemable notes and $250 million of redeemable
cumulative convertible preferred stock in private placements. Proceeds from the
sales of these securities will be used to continue the enhancement and expansion
of the network, for working capital and for general corporate purposes.
NETWORK GUIDANCE
Williams Communications continues to target 20 percent sequential growth in
recurring network revenue, which excludes one-time dark fiber sales and revenue
from PowerTel for the fourth quarter. When this expected growth is combined with
strong third quarter capacity sales and full-year dark fiber revenue of
approximately $70 million, full-year network revenue is estimated at $700
million, or about 10 percent greater than current analyst consensus. The company
remains confident in its ability to meet current 2001 analyst estimates for
total network revenue that range between $1.3 billion and $1.4 billion. This
reflects a 100 percent year-over-year growth in recurring revenue, 100 percent
growth in PowerTel revenue and approximately $100 million in dark fiber-related
revenue. Consistent with these revenue expectations, the company is targeting
the network being EBITDA-positive on an operational basis by the end of 2001.
WEBCAST AND CONFERENCE CALL REPLAY SCHEDULED
A live webcast and replay of today's analyst conference call at 10 a.m. EDT is
available at http://www.williamscommunications.com. A telephone replay will be
available one hour after the conclusion of the call through Tuesday, Oct. 31.
The replay call-in number is (800) 625-5288 or (303) 804-1855 for international
calls. The passcode is 815393.
