Hawaiian Tel
profit soars

The company saw a 130%
rise in net for fourth quarter '97

By Russ Lynch
Star-Bulletin

Boosted by a strong final quarter, GTE Hawaiian Tel today reported an 11.5 percent increase in its annual income, despite facing new competition from many quarters.

The company said it had a profit of $61 million in 1997 compared with $54.7 million in 1996.

The company did not report its final quarter earnings, but based on what it earned through the first nine months, the profit for the three months ending Dec. 31 works out at $15.4 million. For the comparable period of 1996, the company earned $6.6 million. That means a quarterly increase of 130 percent.

The fourth-quarter improvement followed two quarters of earnings below their year-earlier levels.

Commenting on the year as a whole, the company said part of the reason for higher profits was increased use of its lines, some of it from the growth of Internet use. There was a 13 percent increase in minutes of use of the network, compared with 1996.

GTE Hawaiian Tel also managed to reduce its annual expenses by $16 million.

However, 1997 was also a year of rapidly growing competition, which the company said cost it a big chunk of its interisland toll volume as well as pushing down interisland rates.

"Competitors attacked from virtually every angle, but we kept our focus on our customers," said Warren Haruki, president. Haruki said the state Public Utilities Commission has authorized more than 140 companies to compete in Hawaii's telecommunications market.

Many of the newcomers targeted the interisland market, he said.

Those inroads, plus a low rate of 9 cents a minute in off-peak hours, caused a 31 percent drop in toll revenues last year, to $61.2 million from $88.8 million in 1996, Haruki said.

Telecommunications competition also had its benefits, however. For example, GTE Hawaiian Tel's 1997 revenues from network access services -- mostly fees paid by other telecommunications companies to access the Hawaii system for competing long-distance connections -- were up 9.5 percent at $162.7 million, compared with $148.6 million in 1996.

Higher local rates approved by the PUC helped push local-services revenues up by 12.5 percent, to $267.7 million from $238 million in 1996.

Other factors behind the increased local revenues included the company's success in selling added services such its SmartCall custom-calling service.

The gains and losses balanced out to a slight improvement in total revenues. The company reported revenues of $642.3 million for 1997, up 1.2 percent from $634.9 million in 1996.

The company reduced its operating expenses by 3 percent, to $502.3 million in 1997 from $518.1 million in 1996.

There was a new expense, however, to start altering the company's computer systems to prepare for the year 2000, when many computers will fail to do their job because they can't differentiate between 2000 and 1900.

Last year, Hawaiian Tel spent $1.4 million to begin year 2000 preparations and by the time 2000 comes around, the company's expenses for that work are expected to total $9.7 million, according to the company's filing with the Securities & Exchange Commission.

GTE Hawaiian Tel is a wholly owned subsidiary of GTE Corp., based in Stamford, Conn., which had revenues of $23 billion last year.