Pacific Telesis Posts Higher Profit Than Forecast for ’84
In its first year, Pacific Telesis Group, parent of Pacific Bell, outperformed Pacific Telephone & Telegraph Co. in its 77th and last year before the breakup of the Bell System, according to 1984 earnings made public Tuesday.
Pacific Telesis reported 1984 net income of $828.5 million on revenue of $7.8 billion. Earnings per share totaled $8.46, compared to the $8 that the company had forecast before going into operation on Jan. 1, 1984. That forecast was increased last fall to $8.40. For the last three months, traditionally the year’s slowest for telephone companies, the company reported net income of $201 million, or $2.01 a share, on revenue of $2 billion.
Donald E. Guinn, Pacific Telesis’ chairman and chief executive, attributed the better-than-forecast financial results to “stringent cost control and an aggressive marketing effort.” The company trimmed its payroll by 3,900 employees in the year, he said, and that and other cost reductions pared expenses at its Pacific Bell unit by 12% in the last year. At the same time, he said, the company added 381,000 new lines, a 3.5% gain.
The company’s California unit, Pacific Bell, earned a 13.2% profit on stockholders’ equity, compared to the 10% profit generated by Pacific Telephone in 1983. In terms of total capital, the rate of return was 10.98%, compared to 9.22% for Pacific Telephone--though Pacific Bell’s return remained significantly below the 12.64% return approved by the California Public Utilities Commission.
However, the two entities are not otherwise comparable, a spokesman said, because Pacific Telephone in 1983 was a wholly owned subsidiary of American Telephone & Telegraph Co., whose bottom-line results depended to a large extent on internal flows of revenue within the tightly integrated Bell System.
Guinn expressed disappointment, however, that the company’s performance remained “significantly below” the 12.64% authorized by the PUC.
Bradford L. Peery, partner in the investment banking firm of Hicks Peery Inc., attributed that shortcoming to what he called an inadequate rate increase granted by the PUC; the boost took full effect last July 1. Had the new revenue been sufficient, Peery said, the company should have come closer to its authorized rate of return in the year’s second half.
Pacific Bell last week filed with the PUC a proposed $1.36-billion rate increase, which Guinn said aims to “enable us to earn additional revenue, improve return on capital and enable capital recovery to realistically match capital consumption.” The PUC normally grants only a fraction--sometimes less than half--of what utilities seek.
