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EARNINGS

3 Bell Firms Gain; MCI Earnings Plunge

October 20, 1986

Three regional Bell telephone companies reported modest profit increases, but long-distance carrier MCI Communications Corp. said earnings plunged 41%.

Quarterly earnings rose 6.1% at Denver-based US West, 5.4% at St. Louis-based Southwestern Bell and 3.3% at Atlanta-based BellSouth.

MCI's profit was squeezed by a 9.5% rate cut on July 1, the Washington-based company said. Analysts said MCI, the nation's second-biggest long-distance company, is under pressure from rate cuts by No. 1 American Telephone & Telegraph and the rising cost of making connections to local phone networks.

"It's unlikely that they (MCI) will again achieve the profit margin levels that they had in the early '80s," said Neil Yelsey, an analyst for the Salomon Bros. investment firm. But Yelsey said MCI is becoming more efficient and remains a good prospect in the long term.

MCI said it earned $17.9 million in the third quarter, down from $30.3 million. Revenue rose 45% to $909.8 million. Its quarterly profit was bolstered by a $64.9-million gain from the sale of the company's paging and cellular telephone subsidiary. A $16.9-million loss from the prepayment of some notes was charged against this quarter's figures.

The September, 1985, figure was inflated by an $18.2-million land sale.

US West said it earned $268.3 million, up from $252.9 million. The 1985 results were adjusted to reflect a 2-for-1 stock split. Revenue rose 8.7% to $2.14 billion.

Southwestern Bell reported third-quarter net income of $258 million on revenue of $1.96 billion. That compared to $244 million in income on revenue of $1.99 billion in the same period in 1985. The year-ago quarterly results included non-recurring net income of $7 million from Yellow Pages directories, the company said.

BellSouth earned $399.2 million in the third quarter, up from $386.4 million a year earlier. Earnings per share declined because of a large increase in shares outstanding. Revenue rose 5.9% to $2.89 billion from $2.73 billion.

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