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 - April 2, 1998
(Date of earliest event reported)
GTE CORPORATION
(Exact name of registrant as specified in charter)
NEW YORK
(State or other jurisdiction of Incorporation)
1-2755 13-1678633
(Commission File Number) (I.R.S. 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
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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 today 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. Confirming comments in the media, GTE affirms
that, as a result of the MCI shareholders accepting a
competing offer, the GTE offer for MCI Communications
Corporation is no longer outstanding. GTE continues to
explore other strategic alternatives.
GTE said the actions announced today will result in a first
quarter 1998 after-tax charge of $802 million, which will
reduce current year earnings per share (EPS) by 83 cents. GTE
estimates that core earnings per share from operations,
excluding the impact of the one-time charge described in the
attached press release filed as Exhibit 99.1 hereto, and the
impact of the data initiatives, will grow not less than 10% in
1998. Excluding the one-time charge, 1998 earnings are
expected to be in line with GTE's prior estimates of moderate
growth compared to 1997. Consistent with prior projections
for 1999 and beyond, consolidated earnings per share,
including the effects of the data initiatives, will grow to an
accelerated level of 13% to 15%. Consolidated revenue growth
will accelerate from the current 9% growth rate to 10% to 12%
over the longer term, normalized for property repositioning.
Much of this growth will be driven by expanded services like
long-distance, video, value-added data communications and
Internet-related services. In addition, new marketing and
sales initiatives will generate significant revenue growth
through sales of bundled services. Operating margins for
domestic telephone operations are expected to be consistent
with margins achieved in 1997.
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GTE has projected that domestic wireless operations will
grow consistent with the industry. Cellular revenues per
customer, however, is expected to continue a downward trend as
more residential customers sign up and new competitors enter
the market.
GTE continues to project that the amount of net income
contributed by its 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 that affect 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 bundled
services through the new marketing and sales initiative, value-
added data communications, Internet-related services, long
distance and video.
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 assumed that the
favorable rulings of the Court of Appeals for the Eighth
Circuit regarding the terms of interconnection, unbundled
network elements and resale rates will be upheld by the U.S.
Supreme Court, which announced it would review this decision.
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 the continued annual
growth of telephone access lines and minutes of use, new and
expanded services, wireless volumes, and customer growth.
They also assume productivity improvements and the absence of
disruption to GTE's markets.
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 Press release dated April 2, 1998.
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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: WILLIAM M. EDWARDS, III
William M. Edwards, III
Vice President and Controller
Date: April 2, 1998
April 2, 1998
SUMMARY:GTE continues transformation into national, high-
growth company; initiates program to sharpen focus by
repositioning non-strategic properties and reducing
costs.
STAMFORD, Conn. - GTE today 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. GTE also will adopt an accounting change
related to its Canadian operations.
GTE said the actions will result in a first-quarter 1998
after-tax, non-recurring charge of $802 million, which is
expected to reduce current year earnings per share (EPS) by
$0.83. More than $600 million of the non-recurring charge
reflects actions that will not affect GTE's cash flow,
including a $300 million non-cash charge for the accounting
change. Excluding the $802 million charge, 1998 earnings are
expected to be in line with GTE's prior estimates.
GTE Chairman and CEO Charles R. Lee said, "GTE is
growing, and is continuing to make the investments necessary
to capture high-growth opportunities across all our
businesses. We are building a state-of-the-art broadband
network and a national service and marketing operation. At
the same time, we are continuing to streamline our traditional
businesses and support functions, both to sharpen our
strategic focus and to reduce our overall cost structure. The
resources we generate through the efforts announced today will
be re-deployed into other strategic initiatives in keeping
with our overall goal to become a national provider of
integrated telecommunications services."
GTE said it has begun taking steps to reposition non-
strategic or under-performing operations. These steps will
include the sale of a small percentage of wireline properties
that do not meet GTE's growth objectives. GTE also has
determined that its air-to-ground communications subsidiary,
Airfone, is not in a strategic business for the company and
said it will develop and implement a plan to reposition that
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business. Additionally, the company will write down
investments in Hybrid Fiber Coax (HFC) technology associated
with its video trial markets because of advances in new
technologies that will eliminate the need for duplicate
networks. The company said it remains fully committed to
developing its video business, which includes more than 70,000
customers in California and Florida.
In outlining its cost-reduction plans, GTE said it
expects to reduce annual operating costs in its traditional
businesses and support functions by more than $500 million
over the next two years through a combination of employee
reductions and improved efficiencies. The company said an $89
million pre-tax charge is included in today's announcement to
reflect costs related to previously announced employee
reductions totaling more than 1,500 positions. Those
reductions are the result of a streamlining of distribution
channels within GTE's Wireless business, the consolidation of
staffs and support functions across GTE, positions eliminated
through the relocation of corporate headquarters to Irving,
Texas, and employee reductions in certain international
operations.
GTE said its cost reduction program is expected to
involve a small percentage of GTE's overall employee base, and
will not compromise customer service and quality nor affect
the investment in and commitment to growth initiatives GTE
announced in 1997. In addition, GTE's overall consolidated
workforce is expected to grow as new businesses expand.
GTE will reflect an accounting change for its Canadian
operations similar to GTE's discontinuance of regulated
accounting principles (FAS 71) in 1995 for its domestic
operations. The Canadian regulatory commission has issued a
series of rulings culminating in a final ruling in March 1998
which opens the Canadian telecommunications market to full
competition, making the continued use of regulated accounting
principles inappropriate for GTE's Canadian operations. The
change will result in a non-cash charge totaling $300 million
after tax.
In addition, GTE said it has called $800 million in high-
coupon debt and preferred stock, taking advantage of existing
low interest rates. Calling the debt will result in a one-
time charge of $20 million in the first quarter and will
provide a net present value to GTE of approximately $50
million.
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Summary of Actions
Mr. Lee said, "These actions are in line with our
strategy of capturing emerging market opportunities to enhance
shareholder value. We are focused on growth. With the
implementation of these actions and the creation of additional
investment capital, we will have increased flexibility to
acquire assets or to invest in internal capabilities, and to
move quickly as the need or the opportunity arises."
A summary of the actions announced today is as follows:
Generation of $2-$3 billion in cash available for the
implementation of strategic initiatives. The cash will
come from the repositioning of non-strategic or under-
performing properties.
Cost reductions of $500 million from increased
productivity and improved efficiencies.
A first-quarter, pre-tax charge of $755 million ($482
million after tax) related to cost reductions, the write-
down of HFC test market technologies in the video
business, a reserve for the disposition of Airfone
assets, and other items.
Extraordinary charges totaling $320 million after tax
associated with implementing a required accounting change
affecting GTE's Canadian operations and the calling of
$800 million in high-coupon debt and preferred stock.
With revenues of more than $23 billion, GTE is one of the
world's largest telecommunications companies and a leading
provider of integrated telecommunications services. In the
United States, GTE provides local service in 28 states and
wireless service in 17 states; nationwide long-distance and
internetworking services ranging from dial-up Internet access
for residential and small-business customers to Web-based
applications for Fortune 500 companies; as well as video
service in selected markets. Outside the United States, the
company serves more than 7 million telecommunications
customers.
This announcement contains forward-looking statements.
These 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 that affect GTE
directly.
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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 bundled services through new
marketing and sales initiatives, value-added data
communications, internet-related services, long distance and
video. 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.
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 announcement. If
future events and actual performance differ from that assumed
in the risk factors noted above, GTE's actual results could
vary significantly from the performance projected in this
announcement.
