Competition takes its toll on HawTel as net tumbles 34%

By Russ Lynch
Star-Bulletin

GTE Hawaiian Tel's third quarter profit fell by more than one-third compared with the 1996 quarter, as increased competition offset the benefits of new services.

In a Securities & Exchange Commission filing, the company reported a net profit of $10.2 million for the three months ended Sept. 30, down 34.2 percent from a profit of $15.4 million in the 1996 quarter. The dip in profit came despite a 1.6 percent increase in total quarterly revenues, to $156 million from $153.5 million a year earlier.

The company said that increased sales of network access services and new services such as Internet access failed to make up for a loss in long-distance business to companies competing in the interisland telephone market.

Sales of local services were up 4.6 percent at $66.6 million in the latest period from $58.1 million a year earlier. Network access services, in which the telephone company gets paid for letting other telecommunications companies connect with its statewide system, also showed increased sales, up 4.3 percent at $38.8 million for the latest quarter from $37.2 million in the 1996 period.

But the telephone company's third-quarter toll services revenues were down 40.8 percent, at $13.8 million in the latest quarter compared with $23.3 million in the year-earlier period.

GTE Hawaiian Tel is a wholly owned subsidiary of Stamford, Conn.-based GTE Corp., but continues to report its own financial results separately to the SEC.

Calvin Tadaki, a company spokesman, said the third-quarter report shows a continuation of what happened as competitors ate into the company's interisland market share. Hawaiian Tel, which long had a monopoly in the interisland business, now has competitors in that field, such as Sprint Corp., MCI Communications Corp. and AT&T Corp.

For the first nine months of this year, GTE Hawaiian Tel had a profit of $45.5 million, down 5.2 percent from $48 million in the first nine months of 1996. Revenues for the nine months were $482.2 million compared with $472.9 million.

Commenting on the nine months' performance, the company said revenues from local services were up $22.8 million or 13.1 percent, at $196.2 million compared with $173.4 million in the 1996 period. Contributing to the increase was $15.7 million in additional revenues because of higher rates approved by the Public Utilities Commission. The company also sold more special services such as its SmartCall service.

Other telecommunications carriers accessing Hawaiian Tel's network helped lift nine-month network services revenues by 12.9 percent to $123.9 million, from $109.7 million in the year-earlier nine months.

Toll services, however, produced a 32.5 percent drop in nine-month revenues to $46.9 million this year from $69.5 million last year. The company said the drop was due to lower domestic (interisland) toll revenues resulting from increased competition.

In addition, Hawaiian Tel saw some of its interisland revenues slip because of the optional discount calling plans it sold, effectively reducing rates.