SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report - May 6, 1997
(Date of earliest event reported)
GTE Corporation
(Exact name of registrant as specified in its charter)
NEW YORK
(State or other jurisdiction of incorporation or organization)
1-2755 13-1678633
(Commission File Number) (IRS Employer Identification No.)
One Stamford Forum
Stamford, Connecticut 06904
(Address of principal executive offices) (Zip Code)
(203) 965-2000
Registrant's telephone number, including area code
GTE CORPORATION
FORM 8-K
ITEM OF INFORMATION
Item 5. Other Events
In accordance with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, GTE Corporation ("GTE" or the
"Company") is hereby filing cautionary statements identifying important
factors that could cause the Company's actual results to differ materially
from those projected in forward-looking statements of the Company made by or
on behalf of the Company.
Forward-Looking Statements
GTE estimates that earnings-per-share will be essentially flat or
slightly higher in 1997 than in 1996, will grow moderately in 1998 as
compared with 1997, and will grow at an accelerated level in 1999 and
beyond. In 1999 and beyond, GTE estimates that earnings-per-share will grow
in a range of 30% to 50% higher than previous projections of not less than
10% annual growth. Consolidated revenue growth will accelerate from the
current 6% to 8% growth rate to 10% to 12% over the longer term, with much
of that growth driven by expanded services like long distance, video,
value-added data communications and Internet-related services. In the area
of long distance, GTE expects to almost double its customer base in 1997,
and increase its related revenues about seven times from 1996 levels.
GTE estimates that operating income and net income will be unfavorably
impacted in 1997 and 1998, as it incurs additional network, marketing and
other start-up costs associated with its recently announced data initiative.
Cash flows will also be impacted by increased capital spending and
acquisition costs, as well as other start-up costs, but overall, GTE
estimates that cash flow should continue to increase.
GTE estimates that domestic cellular operations will grow consistent
with the industry and will add as many new customers in 1997 as in 1996.
Cellular revenue per customer is expected to continue an annual 7% to 8%
downward trend as more residential customers and new competitors enter the
market.
GTE estimates that the amount of net income contributed by
international operations in 1995 will double by the year 2000.
Risk Factors
GTE's forward-looking statements are based upon a series of projections
and estimates regarding the economy, the telecommunications industry, the
effects of federal, state and local regulations on the industry in general
and within GTE's markets, as well as key performance indicators which impact
the Company directly. These projections and estimates regarding the economy
and the telecommunications industry relate to the demand for and pricing of
services, the effects of competition, the impact of universal service and
the success of new products, services and new businesses such as long
distance, video, value-added data communications and Internet-related
services.
With regard to the effects of regulation, GTE has assumed fair and
reasonable resolutions to any pending and potential federal, state and local
regulatory initiatives and proceedings, including arbitration proceedings
before various state regulatory commissions. GTE has also assumed the
successful outcome of the proceedings filed with the Court of Appeals for
the Eighth Circuit challenging the FCC's published Report and Order, dated
August 8, 1996, regarding the terms of interconnection, unbundled network
elements and resale rates.
In developing its forward-looking statements, GTE has made certain
assumptions relating to key performance indicators that have a direct
bearing on GTE's ability to attain these projections. These assumptions
include continued annual growth in the following areas: telephone access
lines and minutes of use; cellular volumes and customer growth; and the
speed and degree of penetration into new and expanded service offerings,
such as long distance and value-added data communications. These assumptions
also assume productivity improvements and the absence of disruption to GTE's
markets. Regarding the data market, these assumptions rely on assumed
future growth of that market, the ability of GTE to rapidly gain market
share, anticipated advances in technology, the impact of competition, and
the completion and integration of planned data networks.
If future events and actual performance differ from that assumed for
the risk factors noted above, GTE's actual results could vary significantly
from the performance projected in the forward-looking statements.
Item 7. Financial Statements and Exhibits
(a) Financial Statements -- None.
(b) Pro Forma Financial Information -- None.
(c) Exhibits
99.1 Announcement of National Network Strategy.
99.2 Announcement of EPS Growth and Other Projections.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GTE CORPORATION
(Registrant)
By: Lawrence R. Whitman
Lawrence R. Whitman
Vice President and Controller
Date: May 6, 1997
Exhibit 99.1
Page 1
May 6, 1997
GTE Announces Initiatives to Become a Leading National
Provider of Telecommunications Services
-- Will Acquire BBN In Transaction Valued At $616 Million --
-- Purchases Fiber-Optic Network From Qwest --
-- Creates A New National Sales, Service and Marketing Company --
STAMFORD, Connecticut -- GTE Corporation ("GTE") today announced a series of
steps to position itself as a market-leading, national provider of
integrated telecommunications services, according to GTE Chairman and Chief
Executive Officer Charles R. Lee, including a comprehensive plan to enter
the $100 billion market for value-added data communications services -- the
fastest-growing segment of the telecommunications industry.
The actions include the acquisition of BBN Corporation, a leading
provider of end-to-end Internet solutions; a strategic alliance with Cisco
Systems, Inc. to jointly develop enhanced data and Internet services for
customers; and, the purchase of a national, state-of-the-art fiber-optic
network from Qwest Communications. Also included is the creation of a new,
deregulated unit to market integrated voice, video and data solutions both
within and outside GTE's current markets.
"The actions announced today clearly position GTE to have the fastest,
most reliable and most secure national network available, enabling
end-to-end managed network solutions that we believe will be unmatched in
the industry," said Lee.
In detailing its data plan, GTE said the moves announced today will
enable it to:
- Develop innovative and value-added communications services to meet
customer needs, especially in the fast-growing Internet-services
market;
- Create a broadband, national backbone network based on SONET
self-healing fiber rings; and
- Rapidly deploy "next generation" value-added services and Internet
Protocol offerings.
"Simply put, GTE will become a leading national 'one-stop' provider of
local, long distance, Internet and wireless services, and will establish an
advanced data network that will be fully operational next year," said GTE
President Kent B. Foster. "At that point, we will be in a position to reach
virtually the entire U.S. population."
Exhibit 99.1
Page 2
GTE/BBN
Under the terms of the transaction, which was approved by the Boards of
Directors of both companies, GTE will shortly commence a cash tender offer
to acquire all the outstanding shares of BBN common stock at a price of $29
per share. Based on the number of shares of BBN stock currently
outstanding, the equity portion of the transaction is valued at
approximately $616 million. As soon as practicable following the conclusion
of the tender offer, GTE will initiate a merger through which any remaining
shares of BBN not owned by GTE will be converted into cash at the cash
tender offer price in the merger.
Cambridge, Massachusetts-based BBN is a leading provider of high
performance end-to-end Internet solutions such as World Wide Web site
hosting, network security, consulting, systems integration, and dedicated
and dial-up Internet access for government and commercial customers. Its
2,200 employees have extensive experience in leading-edge Internet and other
telecommunications applications. Twenty-eight years ago, BBN created
ARPANET, the forerunner of the Internet.
"GTE will jump-start its entry into the enhanced Internet services
market for large businesses through the acquisition of BBN," said Foster.
George H. Conrades, chairman and chief executive officer of BBN said,
"This business combination is a perfect strategic fit. The Internet
opportunity, characterized by the convergence of computers and
communications, is the fastest-growing economic endeavor in human history.
GTE is today declaring its strategic intent to be a leading player in this
important opportunity, backed up by plans for significant investment and
alliances. BBN has been chosen to be the cornerstone of GTE's new strategy.
We bring needed Internet skills, a suite of offerings and a business
customer base.
"At the same time, we will be able to take advantage of GTE's strong
brand image, distribution, network expansion plans and financial resources.
Today, no one player in this industry has all the piece parts necessary for
customer and competitive success. It's a game of scale and financial
resources, as well as specialization and innovation. With this
announcement, GTE, with BBN, is off to a great start," Conrades said.
GTE/Cisco
GTE and Cisco announce their intention to jointly develop enhanced
internetworking capabilities to power GTE's network. Beyond the network
infrastructure, the companies have committed to deliver targeted, turn-key,
bundled solutions of applications, equipment installation, maintenance and
telecommunication services.
"Cisco is the leading provider of Internet-related networking services.
Its skill sets perfectly complement those of GTE, and we are pleased to
enter into this long-term, mutually beneficial strategic relationship," said
GTE's Foster.
"This combination will create a fundamentally new offering in the
marketplace," said John Chambers, president and chief executive officer at
Cisco Systems, Inc. "GTE will have leadership capabilities to provide
integrated end-to-end services across all layers of the network such as
multimedia, quality and security. The relationship will accelerate the
deployment of these and other services through the alignment of our core
competencies."
Exhibit 99.1
Page 3
GTE/Qwest
Denver-based Qwest Communications Corp. is constructing a fiber-based
national backbone network which will be equipped with state-of-the-art
opto-electronics. The network will span 13,000 miles, connecting 92
metropolitan areas, including Atlanta, Chicago, Los Angeles, New York, San
Francisco and Washington, D.C. In an agreement announced Monday, GTE will
acquire 24 dark fibers, and certain associated facilities, in the new Qwest
network.
"When completed in 1998, the network will provide the foundation for a
myriad of high-speed data communication services. GTE's network will
greatly reduce the high upfront cost of today's private data networks,
making advanced data communications more affordable for a greater segment of
the population," Foster stated.
"We are extremely pleased with GTE's acquisition of dark fiber on the
Qwest network route," said Joe Nacchio, president and chief executive
officer of Qwest.
GTE Restructures Telephone Operations,
Creates New National Sales, Service and Marketing Company
As part of the company's plan to capture new growth, GTE restructured
its Telephone Operations unit, Foster said.
To move with greater flexibility to capture growth opportunities in the
telecommunications marketplace, GTE created an unregulated sales, service
and marketing unit to offer an integrated package of local, long distance,
Internet and wireless services nationwide, regardless of GTE's traditional
market boundaries.
This new unit will operate as a competitive local exchange carrier
(CLEC), offering targeted customers premium servicing capabilities and
packaged products beyond what is currently available in the marketplace
today.
Foster also announced the following realignment of key
responsibilities: Thomas W. White, 51, has been named corporate executive
vice president-market operations, reporting to Foster. He will assist the
GTE president in coordinating the activities of the below-mentioned business
units and also will be responsible for leading the company's overall data
thrust. White has served as president of GTE Telephone Operations since
July 1995.
Also reporting to Foster are the following newly appointed individuals:
- Lew Wilks, 43, has been named president of GTE's new national sales,
service and marketing unit. This new retail business unit will offer a
bundled package of premium telecommunications services to business and
residential customers both within and outside GTE's current franchise areas.
Wilks previously served as president, business markets, since July, 1996.
- John Appel, 48, has been named president of GTE's current regulated
local exchange operations. Appel will continue work already underway to
enhance quality and customer service and to preserve and grow GTE's current
in-franchise, regulated business. Appel was appointed to his previous
position, executive vice president-Network Operations, in January 1996.
- Jerry Dinsmore, 47, has been named president - Business Development
and Integration, responsible for coordination and integration of all
marketing, technology, finance, planning and business analysis, and
regulatory for the above units. Dinsmore's principal responsibility will be
to lead an integrated approach to the marketplace.
Exhibit 99.1
Page 4
Now that these individuals have been named, they will begin to develop
transition plans for their respective businesses and assume their new
positions on June 1.
GTE's Wireless, Directories and Airfone units will continue to report
directly to GTE President Kent Foster.
"The organizations and people now in place will drive our growth in the
marketplace in a powerful way," said Foster.
Background on BBN
BBN is one of the nation's leading providers of Internet access and
value-added services for businesses, with annualized revenue of more than
$380 million for BBN's third quarter, announced today. It offers Fortune
1000 companies a complete set of managed Internet services, including
high-speed and dial-up access, systems development and electronic-commerce
support, network security, and Web hosting services. BBN also provides
network-related contract research and development for government and
commercial customers. BBN's Internet customers include many of the world's
top information technology, manufacturing and financial services companies.
BBN's home page address is http://www.bbn.com.
Background on GTE
With revenues of more than $21 billion in 1996, GTE is one of the
largest publicly held telecommunications companies in the world. In the
United States, GTE offers local and wireless service in 29 states and
long-distance service in all 50 states. GTE was the first among its peers
to offer "one-stop shopping" for local, long-distance and Internet access
services. Outside the United States, where GTE has operated for more than
40 years, the company serves over 6.5 million customers. GTE is also a
leader in government and defense communications systems and equipment,
directories and telecommunications-based information services, and
aircraft-passenger telecommunications.
Additional information about GTE can be found on the Internet at
http://www.gte.com.
Exhibit 99.2
Page 1
May 6, 1997
SUMMARY: Because of new investments and growth strategy announced
earlier today, GTE says EPS growth for 1997 will be flat to
slightly positive; moderate EPS growth in 1998, and, in
1999 it expects EPS to grow 30% to 50% higher than previous
projections of "not less than 10%."
NEW YORK -- Due to investments and a detailed growth strategy announced
earlier today that will position GTE as a leading national provider of
telecommunications services, GTE's earnings per share growth for 1997 will
be flat to slightly positive, GTE Chairman and Chief Executive Officer
Charles R. Lee said at a meeting with security analysts.
Earlier this morning, GTE issued a press release announcing the
acquisition of BBN Corporation, a leading provider of end-to-end Internet
solutions; a strategic alliance with Cisco Systems, Inc. to jointly develop
enhanced data and Internet services for customers; and, the purchase of a
national, state-of-the-art fiber-optic network from Qwest Communications.
GTE had previously stated that it expected to achieve not less than 10
percent earnings growth for the foreseeable future -- and has achieved that
goal for seven consecutive quarters.
"Today's announcements represent a bold strategy that will position GTE
for greater profitable growth over the next several years," the GTE chairman
said.
"In 1998, we will see moderate growth in EPS, and in 1999 and beyond,
we're looking for a growth rate that is 30 to 50 percent higher than our
previous guidance of not less than 10 percent," Lee stated.
"Obviously, this short-term reduction in our earnings growth is due to
the critical investments we must make for the future," said Lee. "We remain
committed to our primary financial objective of maximizing long-term total
return to our shareholders."
With revenues of more than $21 billion in 1996, GTE is one of the
largest publicly held telecommunications companies in the world.
This press release contains forward-looking statements. These
forward-looking statements are based upon a series of projections and
estimates regarding economies within our markets, the telecommunications
industry, the effects of Federal, state and local regulations on the
industry in general and on GTE's operations, as well as key performance
indicators which impact the Company directly. These statements are also
based upon a series of projections and estimates regarding the growth of the
data market, the ability of GTE to rapidly gain market share, and the
completion and integration of planned data networks. GTE's Current Report
on Form 8-K filed today with the Securities and Exchange Commission
discusses the important factors that could cause the actual results to
differ materially from those contained in this press release.
