GTE focuses on the future: Moves may help long-distance hopefuls

Although GTE's recently announced restructuring will cause a dip in its 1998 earnings, the company is moving in the right direction, said several telecom analysts last week. The overhaul should not strongly affect the telecom industry on the whole but may provide a model for local carriers entering the long-distance market, they said.

GTE said it would generate $2 billion to $3 billion in cash for strategic initiatives by repositioning and selling "non-strategic" operations, and it plans to reduce annual costs by more than $500 million through employee reductions and improved efficiencies. This means several under-performing local operations will be sold, Airfone will be repositioned and, as a result of relocation and consolidation, 1500 positions will be eliminated.

In addition, the company will write off its interest in hybrid fiber/coax (HFC) technology associated with its video trial markets in favor of building a new fiber network to provide similar service through digital subscriber line technology. The HFC systems will remain in place until further decisions are made, a GTE spokesman said.

The moves will result in a first-quarter non-recurring charge of $802 million, which is expected to reduce 1998 earnings by 83 cents per share, GTE said. Despite this decrease, stockholder interest in GTE should not wane, said TeleChoice President Danny Briere. "People look at what [GTE] is doing and think something big is going to happen," he said.

Some analysts speculate that the company is thinning itself to prepare for a merger. The primary reason behind the restructuring is for the company to focus on "future" technology, especially data transfer services, said Clif Holliday, an analyst with B&C Consulting and former GTE executive. GTE's actions show it's moving away from long-distance to broadband and national fiber networks as well as working with Internet service providers. So the Bell companies, which are still trying to enter the long-distance market, won't be imitating GTE's actions any time soon, he said.

"GTE has gotten all the pieces together, and now it's focusing those pieces," Holliday said. "The [RHCs] don't even have the pieces yet."