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SBC Communications reports 17.8 percent rise in earnings

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SBC Communications Inc. Oct. 15 announced third-quarter results, reporting a 17.8 percent increase in earnings per diluted share to 53 cents, compared to 45 cents in the third quarter of 1997. A release from the company said solid core business performance and strong growth in data and vertical services drove SBC's results. The quarterly figures exclude one-time gains in 1998 and merger-related costs in 1997.

Earnings for the third quarter increased 19.6 percent to $988 million, before one-time gains resulting from the sale of certain non-core businesses, compared with third-quarter 1997 results of $826 million, after excluding one-time expenses related to its merger with Pacific Telesis, according to a news release from SBC.

On a reported basis, SBC's quarterly earnings were $1.2 billion, or 65 cents per diluted share, compared with $816 million during the third quarter of 1997. Third-quarter revenues increased 7.1 percent to $6.8 billion from $6.3 billion last year.

"I'm very proud of the way our company performed this quarter, both for our customers and our share owners," said Edward E. Whitacre Jr., chairman and chief executive officer. "Our strong third-quarter performance shows that our strategies, our management team and our employees are right on track."

Whitacre said the company is realizing the benefits from its merger with Pacific Telesis, showing the company's ability to integrate the business "so that they perform as a single, unified team."

Data services revenues exceeded $550 million for the quarter, an increase of 33 percent over the same period a year ago. The company said the increase reflected strong customer demand for high-speed dedicated and switched transport services.

Vertical services revenues increased more than 20 percent, mostly attributable to increases in Caller ID subscribers. Pacific Bell reached its one millionth residential Caller ID subscriber, increasing penetration in the consumer segment to 11.5 percent from 3 percent in the same quarter of 1997.

Southwestern Bell's Caller ID penetration exceeded 49 percent, the highest in the industry, according to SBC.

SBC added 388,000 access lines during the quarter and 1.5 million during the last 12 months, resulting in access-line growth during the last 12 months of 4.7 percent for SBC's switched services.

Line growth on a voice-grade equivalent basis, which includes the impact of both switched services and non-switched, high-speed data services, was 9.2 percent for the last 12 months. This increase better reflects total line growth as data services play an increasingly important role in telecommunications.

SBC added 151,000 net wireless subscribers during the quarter, driven by strong PCS growth in California. Overall, SBC added 754,000 net subscribers during the last 12 months, increasing the total number of subscribers 14.4 percent during that period.

Southwestern Bell Telephone and Pacific Bell quarterly revenues grew 7.2 percent and 8.5 percent over third-quarter 1997 revenues to $2.8 billion and $2.4 billion, respectively.

Revenue growth was largely driven by high demand for data and vertical services. Data revenues at Southwestern Bell and Pacific Bell grew 35 percent and 27 percent, respectively.

Southwestern Bell increased its vertical feature penetration in the third quarter to 2.48 features per line, compared with 2.34 features per line in the same quarter last year. Pacific Bell increased feature penetration to 1.04 from 0.74 features per line during the same period last year.

At Southwestern Bell, earnings increased 6.6 percent to $403 million, from a normalized $378 million in the same quarter last year.

Pacific Bell reported earnings growth of 37.3 percent to $320 million from a normalized $233 million in last year's third quarter.

Normalized results in 1997 exclude one-time expenses for strategic initiatives resulting from the Pacific Telesis merger.

SBC's wireless subscriber revenues increased 10.7 percent over the same quarter last year to $911 million, driven by PCS subscriber growth in California. During the third quarter, SBC added a net 100,000 PCS customers in California and Nevada, and 51,000 customers in its cellular markets.

As a result of strong margin growth in SBC's traditional cellular markets and continued improvement in the profitability of the company's PCS operations, subscriber cash margins increased to 40.5 percent in the quarter, compared with 30.7 percent in the third quarter last year.

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