<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
F O R M 10 - Q
X Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period ended June 30, 1998
.............
or
Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from to
Commission File Number: 1-2755
......
GTE Corporation
......................................................
(Exact name of registrant as specified in its charter)
New York 13-1678633
........................................................................
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Stamford Forum, Stamford, Conn. 06904
.....................................................
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 203-965-2000
............
........................................................................
Former name, former address and former fiscal year, if changed since
last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES X
NO .
GTE had 964,030,640 shares of $.05 par value common stock outstanding
(excluding 24,055,445 treasury shares) at July 31, 1998.
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
GTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
(In Millions)
<S> <C> <C> <C> <C>
REVENUES AND SALES
Local services $1,771 $1,613 $ 3,501 $ 3,218
Network access services 1,290 1,260 2,616 2,412
Toll services 572 608 1,163 1,251
Wireless services 745 719 1,463 1,396
Directory services 379 372 574 558
Other services and sales 1,520 1,120 2,845 2,138
Total revenues and sales 6,277 5,692 12,162 10,973
OPERATING COSTS AND EXPENSES
Cost of services and sales 2,671 2,194 5,169 4,146
Selling, general & administrative 1,231 1,115 2,302 2,142
Depreciation and amortization 943 977 1,912 1,933
Special charges - - 755 -
Total costs and expenses 4,845 4,286 10,138 8,221
OPERATING INCOME 1,432 1,406 2,024 2,752
OTHER (INCOME) EXPENSE
Interest expense 349 312 675 616
Interest capitalized (6) (10) (15) (23)
Interest income (32) (13) (60) (29)
Other - net 21 20 44 40
332 309 644 604
INCOME BEFORE INCOME TAXES 1,100 1,097 1,380 2,148
Income taxes 427 426 565 812
INCOME BEFORE EXTRAORDINARY CHARGES 673 671 815 1,336
Extraordinary charges - - (320) -
NET INCOME $ 673 $ 671 $ 495 $1,336
BASIC EARNINGS (LOSS) PER COMMON SHARE:
Before extraordinary charges $ .70 $ .70 $ .85 $ 1.39
Extraordinary charges - - (.33) -
NET INCOME $ .70 $ .70 $ .52 $ 1.39
DILUTED EARNINGS (LOSS) PER COMMON SHARE:
Before extraordinary charges $ .69 $ .70 $ .84 $ 1.39
Extraordinary charges - - (.33) -
NET INCOME $ .69 $ .70 $ .51 $ 1.39
AVERAGE COMMON SHARES OUTSTANDING:
Basic 962 956 961 958
Diluted 972 959 969 962
The accompanying notes are an integral part of these statements.
-1-
</TABLE>
<PAGE>
GTE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated net income for the second quarter and first six months of 1998
was $673 million and $495 million, or $.70 per share and $.52 per share,
respectively, compared with $671 million and $1.34 billion, or $.70 per
share and $1.39 per share in the second quarter and first half of 1997,
respectively. The results for the first six months of 1998 include
after-tax special charges of $482 million, or $.50 per share, related to
cost reductions, the write-down of Hybrid Fiber Coax ("HFC") test market
technologies in GTE's video business, a reserve for the disposition of GTE
Airfone ("Airfone") assets, and other items. In addition, the 1998 year to
date results reflect a non-cash extraordinary charge of $300 million
after-tax, or $.31 per share, to discontinue the use of regulatory
accounting principles at GTE's Canadian telephone operations and a one-time
$20 million, or $.02 per share, charge for the redemption of high-coupon
debt and preferred stock. During the first six months of 1998, costs
associated with GTE's new data initiatives reduced net income by $219
million, or $.23 per share. Excluding these costs, the amount associated
with the special charges and the extraordinary charges previously described,
net income for the first half of 1998 would have been $1.52 billion, or
$1.58 per share, an increase of 11.4 percent and 11.3 percent, respectively,
primarily as a result of core revenue growth from both domestic and
international operations.
Operating income for the second quarter and first six months of 1998 was
$1.43 billion and $2.02 billion, respectively, compared with $1.41 billion
and $2.75 billion, in the second quarter and first half of 1997,
respectively. The 1998 year to date results reflect the pre-tax special
charge of $755 million. Operating income for the second quarter and first
six months of 1998 reflect results associated with the data initiatives of
$159 million and $301 million, respectively. Excluding these items,
operating income for the second quarter and first six months of 1998 rose
10.6 percent to $1.59 billion and $3.08 billion, respectively, primarily as
a result of core revenue growth from both domestic and international
operations.
Consolidated revenues and sales for the second quarter of 1998 increased
10.3 percent to $6.28 billion compared with $5.69 billion in the second
quarter of 1997. This increase primarily resulted from continued growth in
core domestic wireline, as well as increased long-distance revenues,
international Canadian operations and wireless services. In addition, data
revenues for the second quarter of 1998 were $191 million compared to $11
million in the year-ago quarter in which the data initiatives were launched.
Consolidated revenues and sales for the first six months of 1998 increased
10.8 percent to $12.16 billion compared to $10.97 billion in the same period
last year. Excluding revenues related to the new data initiatives,
consolidated revenues and sales for the second quarter and first six months
of 1998 grew 7.1 percent and 7.6 percent, respectively.
For the second quarter of 1998, minutes of use of GTE's domestic
local-exchange network for long-distance calling grew at an annual rate of
12.5 percent, while total domestic access lines increased 7.8 percent to
22.3 million. Internationally, GTE serves an additional 6.2 million access
lines, an increase of 5.1 percent over the second quarter of 1997.
-2-
<PAGE>
GTE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
Domestic wireless service revenues in the second quarter of 1998 totaled
$671 million, a 2.6 percent increase over the same period last year.
Revenue growth is driven by customer additions and increasing revenue from
existing customers through continuous emphasis on customer service levels to
improve retention and from new products and services. U.S. wireless
customers served grew to 4,631,000, an increase of 11.6 percent over a year
ago. Customer growth at GTE's international operations increased
significantly, bringing total wireless customers served worldwide to 6.8
million.
GTE is one of the largest publicly held telecommunications companies in the
world. In the United States, GTE offers local service in 28 states and
wireless service in 17 states; nationwide long-distance service and
internetworking services ranging from dial-up Internet access for
residential and small business consumers to Web-based applications for
Fortune 500 companies; as well as video service in selected markets.
Outside the United States, GTE serves over 8 million telecommunication
customers. GTE is also a leader in government and defense communications
systems and equipment, directories and telecommunication-based information
services, and aircraft-passenger telecommunications.
CAPITAL RESOURCES AND LIQUIDITY
Cash from operations for the first six months of 1998 totaled $2.58 billion
compared to $2.83 billion for the first half of 1997. The decrease in cash
from operations is primarily due to an increase in working capital
requirements.
Cash used in investing activities totaled $2.45 billion, compared with $2.74
billion in the first six months of 1997. Capital expenditures totaled $2.55
billion compared with $2.03 billion in the first six months of last year.
For the full year 1998, capital expenditures are expected to be
approximately equal to 1997. The majority of new investment is being made
to meet the demands of growth, modernize facilities and position GTE as a
provider of high-quality voice, data and video telecommunications services.
Significant investments are also being made to build and expand GTE's data
network.
In July, a GTE-led group agreed to purchase a majority stake (51% plus one
share) in the Puerto Rico Telephone Company ("PRTC") for $444 million. At
closing, which is expected by year-end 1998, GTE will sell 6% to Popular,
Inc., which will then contribute 1% to the PRTC Employee Stock Ownership
Plan. In addition, GTE will sell another 5% to other partners in the group
which will leave GTE with a 40% investment in PRTC for $348 million.
Cash provided from financing activities for the first six months of 1998
totaled $267 million, compared with $454 million in the same period last
year. During the first six months of 1998, dividend payments totaled $901
million. In addition, financing activities during the first half of 1998
included a $970 million net increase in long and short-term borrowings and
the issuance of $235 million of common stock, as well as other net items.
In April 1998, GTE issued $2.1 billion of debentures, and used the net
proceeds to reduce short-term debt obligations. The transaction consisted
of four tranches with maturities ranging from 8 to 30 years. This long-term
debt offering was the largest in GTE's history.
-3-
<PAGE> GTE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
In its April 2, 1998 filing on Form 8-K, GTE stated that because the MCI
shareholders had accepted a competing offer, GTE's offer for MCI was no
longer outstanding. As a result, GTE and its subsidiaries were removed from
"Credit Watch" by all the rating agencies. GTE believes that its present
investment grade credit rating and those of its subsidiaries provides ready
access to the capital markets at reasonable rates and provides GTE with the
financial flexibility necessary to pursue growth opportunities as they
arise. At June 30, 1998, GTE had $4.4 billion of unused bank lines of
credit available to back up commercial paper borrowings and for working
capital requirements.
RECENT DEVELOPMENTS
On July 27, 1998, GTE and Bell Atlantic entered into a merger agreement
providing for the combination of the two companies in a merger of equals
transaction. Under terms of the definitive agreement, which was unanimously
approved by the board of directors of both companies, GTE shareholders will
receive 1.22 shares of Bell Atlantic stock for each GTE share they own. The
merger is expected to be accounted for as a pooling of interests, is subject
to shareholder and regulatory approvals, and is expected to be completed
during the second half of 1999. For additional information regarding the
merger, refer to the Form 8-K filed by GTE dated July 27, 1998.
In May 1998, GTE filed a private antitrust lawsuit in federal court to block
the proposed $38 billion merger of WorldCom and MCI to ensure the combined
mega-company will not have the ability to monopolize the Internet or
significantly endanger competition in long distance telephone markets.
The suit, which was filed in U.S. federal district court in Washington,
D.C., asserts that the merger of WorldCom-MCI, the number one and number two
backbone providers, will allow the combined company to monopolize the market
for Internet backbone services. GTE said in its suit that the combined
company would own 40-60 percent of the critical Internet "backbone" network
that transmits and routes data for consumer and Internet service providers.
The suit also cites the significantly diminished competition in the retail
long distance market that would be created by merging the second- and
fourth-largest long distance telephone companies. Combining WorldCom-MCI
removes the key supplier from the wholesale long distance market, i.e.,
WorldCom, and lessens competition for long distance resellers, like GTE,
that compete with AT&T, MCI, and Sprint.
In April 1998, GTE announced a series of actions designed to further sharpen
its strategic focus and improve its competitive position by repositioning
non-strategic properties and reducing costs. GTE expects to generate
after-tax proceeds of $2-$3 billion by selling non-strategic or
under-performing operations, and plans to reduce annual costs by more than
$500 million through improved efficiencies and productivity while it
continues to invest in new high-growth opportunities. For more information
regarding these announcements, please refer to the Forms 8-K filed by GTE,
dated April 2, 1998 and April 14, 1998.
GTE filed interstate access revisions during 1997 that became effective June
3, 1997 and July 1, 1997. Overall, these filings resulted in a net annual
price reduction of $106 million. In 1997, the FCC also ordered significant
changes that altered the structure of access charges collected by GTE,
-4-
<PAGE> GTE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
effective January 1, 1998. Generally, the FCC reduced and restructured the
per minute charges paid by long-distance carriers and implemented new per
line charges. The FCC also created an access charge structure that resulted
in different access charges for residential primary and secondary lines and
single line and multi-line business lines. In aggregate, the reductions in
usage sensitive access charges paid by long-distance carriers were offset by
new per line charges and the charges paid by end-users. Effective July 1,
1998, GTE further reduced access charges by $120 million in compliance with
FCC requirements to restate the impacts of access charge reform and in
making its 1998 Annual Filing.
GTE's Year 2000 Program, as described in its 1997 Annual Report on
Form 10-K, continues. However, due to GTE's recently announced pending
acquisition of PRTC, the current estimate for the total cost of remediation
for GTE and affiliates is approximately $370 million. As of June 30, 1998,
expenditures totaled $135 million.
-5-
<PAGE>
GTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1998 1997
(In Millions)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 953 $ 551
Receivables, less allowances
of $354 and $333 million 4,647 4,782
Inventories and supplies 825 846
Deferred income tax benefits 48 51
Other 352 307
Total Current Assets 6,825 6,537
PROPERTY, PLANT AND EQUIPMENT, at cost 57,822 56,490
Accumulated depreciation (34,403) (32,410)
Total Property, Plant and Equipment, net 23,419 24,080
INVESTMENTS AND OTHER ASSETS:
Prepaid pension costs 4,639 4,361
Franchises, goodwill and other intangibles,
net of accumulated amortization of $759
and $677 million 3,081 3,232
Investments in unconsolidated companies 2,416 2,335
Other assets 1,538 1,597
Total Investments and Other Assets 11,674 11,525
Total Assets $41,918 $42,142
The accompanying notes are an integral part of these statements.
-6-
<PAGE>
GTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1998 1997
(In Millions)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term obligations, including
current maturities $ 3,950 $ 3,398
Accounts payable and accrued expenses 4,302 4,672
Taxes payable 896 771
Dividends payable 470 466
Other 578 534
Total Current Liabilities 10,196 9,841
Long-term debt 14,912 14,494
Employee benefit plans 4,717 4,756
Deferred income taxes 1,390 1,782
Minority interests in equity of subsidiaries 1,989 2,253
Other liabilities 895 978
Total Liabilities 34,099 34,104
SHAREHOLDERS' EQUITY:
Common stock - shares issued 987,827,834
and 984,252,887 49 49
Additional paid-in capital 7,721 7,560
Retained earnings 1,968 2,372
Accumulated other comprehensive income (313) (243)
Guaranteed ESOP obligations (529) (550)
Treasury stock _ 24,585,828 and
26,253,088 shares, at cost (1,077) (1,150)
Total Shareholders' Equity 7,819 8,038
Total Liabilities and
Shareholders' Equity $41,918 $42,142
The accompanying notes are an integral part of these statements.
-7-
<PAGE>
GTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30
1998 1997
(In Millions)
Operations
Income before extraordinary charges $ 815 $1,336
Adjustments to reconcile income before
extraordinary charges to net cash
from operations:
Depreciation and amortization 1,912 1,933
Special charges 755 -
Change in current assets and current
liabilities, excluding the effects of
acquisitions and dispositions (695) (532)
Deferred income taxes and other - net (206) 91
Net cash from operations 2,581 2,828
Investing
Capital expenditures (2,548) (2,033)
Acquisitions and investments (50) (700)
Proceeds from sales of assets 83 17
Other - net 69 (22)
Net cash used in investing (2,446) (2,738)
Financing
Common stock issued 235 162
Purchase of treasury stock - (576)
Long-term debt issued 3,479 1,533
Long-term debt and preferred securities retired (1,745) (1,379)
Dividends paid (901) (903)
Increase (decrease) in short-term obligations,
excluding current maturities (764) 1,634
Other - net (37) (17)
Net cash provided from financing 267 454
Increase in cash and cash equivalents 402 544
Cash and cash equivalents:
Beginning of period 551 405
End of period $ 953 $ 949
Cash paid during the period for:
Interest $ 652 $ 531
Income taxes 395 540
The accompanying notes are an integral part of these statements.
-8-
<PAGE> GTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION:
The unaudited Condensed Consolidated Financial Statements included
herein have been prepared by the Company, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. However, in the opinion of management of the Company,
the Condensed Consolidated Financial Statements include all
adjustments, which consist only of normal recurring accruals, necessary
to present fairly the financial information for such periods. These
Condensed Consolidated Financial Statements should be read in
conjunction with the consolidated financial statements and the notes
thereto included in the Company's 1997 Annual Report on Form 10-K.
Reclassifications of prior year data have been made, where appropriate,
to conform to the 1998 presentation.
(2) EXTRAORDINARY AND SPECIAL CHARGES:
During the first quarter of 1998 GTE recorded special charges of $755
million pre-tax, which reduced net income by $482 million, or $.50 per
share. The special charges are related to cost reductions, the write-
down of HFC test market technologies in GTE's video business, a reserve
for the disposition of Airfone assets, and other items. In addition,
results for the first half of 1998 include after-tax extraordinary
charges totaling $320 million, or $.33 per share, reflecting the
discontinuance of regulatory accounting at GTE's Canadian telephone
operations, and the redemption of high-coupon debt and preferred stock.
(3) COMPREHENSIVE INCOME:
Effective January 1, 1998, GTE adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income"
("FAS 130"). Comprehensive income includes both net income and other
comprehensive income. In accordance with the disclosure requirements
of FAS 130, other comprehensive loss for the six months ended
June 30, 1998 and 1997 was $(70) million and $(56) million,
respectively. Included in other comprehensive income are unrealized
gains (losses) on marketable securities and foreign currency
translation gains (losses).
(4) RECENT ACCOUNTING PRONOUNCEMENTS:
Computer Software
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use ("SOP 98-1").
SOP 98-1 defines internal-use software and establishes accounting
standards for the costs of such software. GTE is currently assessing
the impact of adopting SOP 98-1, and intends to implement as of
January 1, 1999.
-9-
<PAGE> GTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS _ (Continued)
Derivative Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("FAS 133"). FAS 133 establishes
accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts,
and for hedging activities. GTE is currently assessing the impact of
adopting FAS 133.
-10-
<PAGE>
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K.
(11) Statement re: Calculation of earnings per common
share.
(12) Statement re: Calculation of the ratio of earnings to
fixed charges.
(27) Financial Data Schedule.
(b) GTE filed a report on Form 8-K dated April 2, 1998 under
Item 5, "Other Events", and Item 7, "Financial Statements and
Exhibits." No financial statements were included with this
report. GTE also filed a report on Form 8-K dated
April 14, 1998 under Item 7, "Financial Statements and
Exhibits." No financial statements were included with this
report. In addition, GTE filed a report on Form 8-K dated
July 27, 1998 under Item 5, "Other Events", and Item 7,
"Financial Statements and Exhibits." No financial statements
were included with this report.
-11-
<PAGE>
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)
Date: August 7, 1998 By Paul R. Shuell
.............................
Paul R. Shuell
Vice President and Controller
Date: August 7, 1998 By Marianne Drost
.............................
Marianne Drost
Secretary
-12-
<PAGE>
<PAGE>
<TABLE>
Exhibit 11
GTE CORPORATION AND SUBSIDIARIES
CALCULATION OF EARNINGS (LOSS) PER COMMON SHARE
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
(In Thousands)
<S> <C> <C> <C> <C>
Net income:
Before extraordinary charges $672,448 $670,527 $814,171 $1,335,874
Extraordinary charges - - (319,523) -
Consolidated net income $672,448 $670,527 $494,648 $1,335,874
Average common shares 962,407 955,533 960,930 958,115
Adjustments to common shares:
Add - Employees' stock and stock option plans 9,360 3,040 8,538 3,500
Adjusted average common shares 971,767 958,573 969,468 961,615
EARNINGS (LOSS) PER COMMON SHARE:
Basic (1)
Before extraordinary charges $ .70 $ .70 $ .85 $ 1.39
Extraordinary charges - - (.33) -
Consolidated $ .70 $ .70 $ .52 $ 1.39
Diluted (2)
Before extraordinary charges $ .69 $ .70 $ .84 $ 1.39
Extraordinary charges - - (.33) -
Consolidated $ .69 $ .70 $ .51 $ 1.39
(1) Computed by dividing net income available to common stockholders by the weighted-average number
of common shares outstanding during the period.
(2) Reflects the potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the issuance of
common stock.
</TABLE>
<PAGE>
<TABLE>
Exhibit 12
GTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF THE RATIO OF EARNINGS TO FIXED CHARGES
(Thousands of Dollars)
(Unaudited)
<CAPTION>
Six Months Ended Years Ended December 31
June 30, 1998 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Net earnings available for fixed charges:
Income from continuing operations $ 814,171 $2,793,566 $2,798,270 $2,537,949 $2,440,869 $ 971,978
Add (deduct) -
Income taxes 565,351 1,624,000 1,613,261 1,466,426 1,532,482 567,747
Interest expense 674,730 1,282,579 1,146,481 1,150,625 1,139,233 1,298,234
Capitalized interest (net of
amortization) (3,545) (12,917) (34,984) (22,971) (6,045) (3,421)
Preferred stock dividends of Parent - - - 5,598 9,910 17,825
Dividends on preferred securities of
subsidiaries 49,237 101,604 106,643 98,604 18,252 22,162
Additional income requirement on preferred
dividends of subsidiaries 2,962 6,789 9,640 9,664 11,426 12,739
Minority interests 99,485 155,332 149,467 145,437 140,464 112,335
Portion of rent expense representing
interest 80,909 132,891 130,660 128,034 139,715 153,058
2,283,300 6,083,844 5,919,438 5,519,366 5,426,306 3,152,657
Deduct - Minority interests (156,642) (280,206) (263,122) (246,678) (242,937) (236,944)
Adjusted earnings available
for fixed charges from
continuing operations $2,126,658 $5,803,638 $5,656,316 $5,272,688 $5,183,369 $2,915,713
Fixed Charges:
Interest charges $ 674,730 $1,282,579 $1,146,481 $1,150,625 $1,139,233 $1,298,234
Dividends on preferred securities
of subsidiaries 49,237 101,604 106,643 98,604 18,252 22,162
Additional income requirement on preferred
dividends of subsidiaries 2,962 6,789 9,640 9,664 11,426 12,739
Portion of rent expense representing
interest 80,909 132,891 130,660 128,034 139,715 153,058
807,838 1,523,863 1,393,424 1,386,927 1,308,626 1,486,193
Deduct - Minority interests (28,895) (66,291) (68,166) (70,052) (68,096) (78,421)
Adjusted fixed charges $ 778,943 $1,457,572 $1,325,258 $1,316,875 $1,240,530 $1,407,772
Ratio of Earnings to Fixed Charges - continuing
operations 2.73 (a) 3.98 4.27 4.00 4.18 2.07
(a) Excluding special charges, GTE's ratio of earnings to fixed charges for the six months ended June 30, 1998 would
have been 3.70.
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1998
<CASH> 953
<SECURITIES> 0
<RECEIVABLES> 4,647
<ALLOWANCES> 0
<INVENTORY> 825
<CURRENT-ASSETS> 6,825
<PP&E> 57,822
<DEPRECIATION> 34,403
<TOTAL-ASSETS> 41,918
<CURRENT-LIABILITIES> 10,196
<BONDS> 14,912
<COMMON> 49
0
0
<OTHER-SE> 7,770
<TOTAL-LIABILITY-AND-EQUITY> 41,918
<SALES> 12,162
<TOTAL-REVENUES> 12,162
<CGS> 10,138
<TOTAL-COSTS> 10,138
<OTHER-EXPENSES> 44
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 675
<INCOME-PRETAX> 1,380
<INCOME-TAX> 565
<INCOME-CONTINUING> 815
<DISCONTINUED> 0
<EXTRAORDINARY> (320)
<CHANGES> 0
<NET-INCOME> 495
<EPS-PRIMARY> .52
<EPS-DILUTED> .51
</TABLE>
