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Verizon Hawaii
earnings sink
19.5 percent

The lower profits were mostly
due to changes in income and
accounting calculations

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By Russ Lynch
Star-Bulletin

Verizon Hawaii Inc. had a 19.5 percent dip in its second-quarter profit after a 14.4 percent fall in revenues compared with last year's quarter but the declines mostly had to do with a different way of handling income from the telephone directories and some accounting changes.

The company, formerly GTE Hawaiian Tel, reported a net profit of $32.7 million for the three months through June 30, compared with a net of $40.6 million for the year-earlier quarter. Second-quarter revenues of $160.9 million were down from a year-earlier $188 million, according to the company's filing with the Securities & Exchange Commission this week.

The revenue decline was mostly in the category of "other services and sales," which had revenues of $39.7 million in the latest quarter compared with a year-earlier $66.2 million. The change was almost entirely due to a switch in directory revenues. In the past, the company showed 60 percent of the directory advertising revenues as its own income, with the other 40 percent going to the parent, now called Verizon Communications.

Since the start of this year, all the directory revenues have been going to the parent company and the local subsidiary has been billing the parent for services such as providing the local names and telephone numbers.

Verizon Hawaii also reported local pre-tax costs of $17.8 million in the latest quarter, as its share of the expenses of the Bell Atlantic-GTE merger that was completed June 30.

Verizon Hawaii's revenues from local service in the latest quarter were up 4.3 percent from the year-earlier period, $78 million vs. $74.8 million in the 1999 quarter.

Network access services revenues, the fees the local phone company gets for giving other service providers access to its lines, dipped 8.1 percent to $43.2 million in the latest quarter from a year-earlier $47 million.

Most of the difference came from rate reductions ordered by regulators.

Operating expenses also declined, slipping 16.6 percent to $97.6 million in the latest quarter from $117 million in the 1999 period.

Verizon Hawaii does not report per-share results, since it has only one stockholder, New York-based parent Verizon Communications. The local company continues to file its financial reports with the SEC, however, because it is still considered a separate legal entity, Verizon officials said.

Bell Atlantic became Verizon Communications after it bought Irving, Texas-based GTE Corp. in a $75 billion deal. The company's shares are down 34 percent this year and closed $1.13 lower at $40.37 today on the New York Stock Exchange.