GTE to Sell Some Local Phone Businesses

GTE Corp. said Thursday that it will sell some local phone businesses for about $2 billion to $3 billion to cut costs and free up cash for expansion into Internet services and other areas with greater sales growth.

The moves should reduce annual costs by more than $500 million in the next two years, including savings from 1,500 job cuts, GTE said.

The company said it expects to take a first-quarter charge of $802 million that will reduce 1998 earnings by 83 cents a share.

GTE is aiming to concentrate on its data services and other high-growth areas. The company, which offers a range of phone services, including local, long-distance and wireless, also wants to expand its national presence before Baby Bell rivals catch up.

The businesses for sale include 5% to 8% of its local phone operations; Airfone, which provides phone service on airplanes; and others that Chief Financial Officer Michael Kelly declined to disclose.

“You have to make sure you have the right assets to go to battle,” he said in an interview.

GTE has 21 million access lines in 28 states. Its wire-line business is concentrated in California, Texas and Florida.

The Stamford, Conn.-based company’s shares rose $1.44 to close at $60.44 on the New York Stock Exchange, after touching a record $60.63 before the announcement was made.

Kelly said the company plans to fire more than 1,500 workers, some of whom were notified Thursday. Although most of the cuts are expected in GTE’s wireless unit, they also include some international positions and some jobs that will be eliminated when the company moves its headquarters to Irving, Texas.

GTE has been hiring workers in some divisions, and Kelly said he doesn’t expect the cuts to significantly change the size of the overall work force of 114,000.

“We do envision additional staff reductions over time,” he said.

Kelly said he expects the company to make several small acquisitions to enhance its services. He declined to disclose potential acquisition targets.

Last year, GTE beefed up its data services by paying $616 million for Internet service provider BBN Corp., an Internet pioneer that connects companies to the global computer network. At the same time, GTE bought part of Qwest Communications International Inc.’s 16,285-mile nationwide network, which is expected to be completed next year.