NEW YORK-GTE Corp. announced a series of asset sales and other actions April 2 that the company said are “designed to further sharpen its strategic focus and improve its competitive position.”
GTE said it expects to generate after-tax proceeds of $2 billion to $3 billion by selling “non-strategic or under-performing operations,” including its Airfone air-to-ground telephone service subsidiary. The company added that it has not had any specific discussions for the sale of any assets, but that its estimates are based on interest expressed in the past.
“These actions … were not preparing us to acquire something, (and we) were not thinking that somebody was going to buy us,” said Michael Kelly, GTE’s chief financial officer.
GTE hasn’t “closed the door” on a major merger, but the consolidation that already has occurred throughout the telecommunications industry has reduced dramatically the number of possible partners, Kelly said.
GTE lost out to WorldCom Inc. in its bid to acquire MCI Communications Corp. Since then, GTE has been seen as a possible merger partner for British Telecommunications plc, which also was rebuffed in its pursuit of MCI. Qwest Communications International Inc., a startup fiber-optic telecommunications carrier of which GTE already owns 25 percent, also has been viewed by outsiders as a possible merger partner.
“GTE already has a lot of bulk and will survive on [its] own,” said Charles DiSanza, an analyst with Gerard Klauer Mattison, New York.
The company will take a first-quarter $755 million pre-tax charge for items that include: cost reductions; a reserve for the disposition of Airfone assets; the write-down of investments in experimental Hybrid Fiber Coax for trial video markets because technology advances have rendered HFC obsolete.
GTE also said it expects to reduce annual operating costs in its traditional businesses and support functions by more than $500 million during the next two years through a combination of employee reductions and improved efficiencies. The company said an $89 million pre-tax charge included in its announcement reflects costs related to previously announced staff reductions totaling more than 1,500 positions, or about 1.3 percent of GTE’s 114,000 employees.
“Those reductions are the result of a streamlining of distribution channels within GTE’s Wireless business, the consolidation of staff and support functions across GTE, positions eliminated through the relocation of corporate headquarters (from Stamford, Conn.,) to Irving, Texas, and employee reductions in certain international operations,” GTE said.
However, the company added that it expects its overall work force to grow as it expands into new businesses.
“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,” said Charles R. Lee, chairman and chief executive officer of GTE.
In the United States, GTE provides local wireline service in 28 states and wireless telecommunications service in 17 states. It also provides nationwide long-distance and inter-networking services that include dial-up Internet access for residential and small-business customers, Web-based applications for Fortune 500 companies and video service in some markets. GTE also has more than 7 million telecommunications customers abroad.
