An increase in Internet business
in 1998 helped offset a drop in
interisland toll business

By Russ Lynch
Star-Bulletin

GTE Hawaiian Tel today reported a 19.5 percent increase in profit for 1998, as growing returns from Internet use and fees charged to other companies to link with its system more than made up for a loss of interisland toll business to competitors.

In its annual report filed with the Securities & Exchange Commission, the company reported a profit of $72.9 million for last year, up from a profit of $61 million in 1997. The year's revenues of $671.3 million were up 4.5 percent from $642.4 million in 1997.

The company did not report its fourth-quarter results. Also, it does not report per-share earnings because all its shares are owned by parent GTE Corp.

Hawaiian Tel's breakdown on 1998 revenues shows the same changes in the business that affected HawTel's results throughout the year -- a small growth in local business, accompanied by a strong boost in charges to other telecommunications companies for access to its Hawaii network.

Local-service revenues of $277 million for the year were up 3 percent from $267.7 million for 1997. Network access services revenues were $177.4 million, up 9 percent from $162.7 million in 1997.

Revenues from other services and sales rose 6 percent to $160.3 million last year, from $150.7 million in 1997. Most of the increase came from higher rental revenues and equipment sales, the company said. Revenues from interisland calls dropped 8 percent to $56.6 million, from $61.3 million in 1997.

"It's clearly showing that there is competition in the interisland business," said Keith Kamisugi, a GTE Hawaiian spokesman. also the company has been able to hold down costs.

The SEC report says the company is debating with the state Department of Taxation over $12 million that the department contends GTE Hawaiian Tel owes in unpaid general excise taxes.

The state says the company should be paying the 4 percent general excise tax on revenues it gets from access charges for letting callers connect to interstate long-distance carriers. HawTel argues that is a wholesale transaction and should be charged at the 0.5 percent wholesale excise tax rate.

The state is conducting an excise tax audit of the company and HawTel said it is awaiting a written statement of the state's position.