Job cuts drag
down HawTel net

Profits fell 23.5 percent
in the first quarter

By Russ Lynch
Star-Bulletin

GTE Hawaiian Tel's first-quarter profit was down by 23.5 percent compared with the year-earlier quarter as the company spent $7.2 million on one-time costs related to reducing its work force.

The money, spent in the first quarter of 1999 in order to save payroll expenses later, went into paying people to leave and providing those who walked away voluntarily with benefits such as help finding other jobs, the company said in a recent filing with the Securities & Exchange Commission.

The deal was very good for the 75 employees who took advantage of it, said their union representative, Harold Dias Jr., business manager of the International Brotherhood of Electrical Workers Local 1357.

"It was really positive," Dias said. What the employees liked most about the deal negotiated between the company and the union was that it allowed workers to take their pension benefit as a lump sum. Those with long service who chose to do so were able to take out substantial sums, as high as several hundred thousand dollars, Dias said.

Keith Kamisugi, a GTE Hawaiian Tel spokesman, said voluntary separations were offered to cut costs. The company offered a "separation incentive" payment -- a bonus scaled according to length of service -- to those who were leaving and they were allowed to keep certain other benefits running, he said.

In its SEC Filing, Hawaiian Tel reported a first-quarter profit of $11.7 million compared with $15.2 million a year earlier. The company's revenues were flat at $68.4 million in the latest quarter.

Hawaiian Tel said revenues, which had been growing steadily, were clipped by a Federal Communications Commission decision last year that reduced the amount local telephone companies can charge outside providers of long-distance telecommunications services for access to their systems. That ruling cost GTE Hawaiian Tel $9 million in lost first-quarter revenues, the company said.

However, demand for such access increased and that helped counter the loss from the FCC ruling by generating a 16 percent growth in minutes of use, or $2.2 million in additional revenues compared with the year-earlier quarter. Still, overall first-quarter revenues from network access services were down 3.9 percent at $45.2 million, from $49.1 million in the 1998 first quarter.

The fast-growing use of the Internet and other high-technology services produced added demand for high "bandwidth," essentially pipeline capacity to handle vast volumes of audio, video and data transmissions. That demand produced $3.7 million in additional first-quarter revenues, GTE Hawaiian Tel said.

The company does not report per-share earnings since it has only one shareholder, Stamford, Conn.-based GTE Corp.