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GTE selling $2B-$3B of assets
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April 2, 1998: 7:47 p.m. ET
$802 million after-tax charge taken to cover divestments, restructuring
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NEW YORK (CNNfn) - GTE Corp. plans to raise $2 billion to $3 billion in proceeds over the next 12 to 36 months by selling assets as part of a major restructuring, which likely will affect "a small percentage" of its 114,500 work force.
GTE said late Thursday that the actions will result in a non-recurring charge in the first quarter of $802 million, or 83 cents a share.
The restructuring comes three weeks after shareholders of MCI Communications Corp. voted in favor of WorldCom Inc.'s $37-billion merger rather than an offer from GTE. In a filing with the Securities and Exchange Commission, GTE formally terminated its offer for MCI.
Proceeds from the asset sales be re-invested in its infrastructure or go for future acquisitions in key areas deemed "high-growth," officials of the Stamford, Conn.-based company said Thursday.
"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 Chairman and Chief Executive Charles R. Lee said.
GTE hopes the actions will reduce annual costs by more than $500 million through layoffs and improved efficiencies.
Excluding the $802 million charge, 1998 earnings are expected to be in line with GTE's prior estimates. Wall Street analysts had expected earnings of 66 cents a share.
GTE's actions will include the sale of a small percentage of wireline properties that don't meet its growth objectives.
GTE also has determined that its air-to-ground communications subsidiary, Airfone, is not in a strategic business and plans to "reposition" that unit.
Additionally, the company will write down investments in hybrid fiber coax technology associated with its video trial markets because of advances in new technologies that will eliminate the need for duplicate networks. Still, GTE said it remains committed to developing its video business, which includes more than 70,000 customers in California and Florida.
The company said an $89-million pretax charge is included in the announcement to reflect costs related to previously announced employee reductions totaling more than 1,500 positions.
A portion of the charge will cover a change in accounting of its Canadian operations. The change will result in a non-cash charge totaling $300 million after taxes.
More than $600 million of the non-recurring charge reflects actions that won't affect GTE's cash flow, including a $300 million non-cash charge.
In addition, $20 million of the overall charge will cover the redemption of $800 million in high-coupon debt and preferred stock, taking advantage of existing low interest rates.
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GTE
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