The Wall Street Journal Interactive Edition -- March 25, 1998

Ameritech Seeks Earnings Growth
With $3 Billion Cost-Cutting Plan

By STEPHANIE N. MEHTA
Staff Reporter of THE WALL STREET JOURNAL

Ameritech Corp., aiming to sustain annual double-digit earnings growth, plans to cut its costs by $3 billion in the next five years in part by eliminating numerous service centers and, as announced, hundreds of jobs.

"Everybody always asks if we are going to be able to keep doing this [increase earnings]," Richard C. Notebaert, Ameritech's chairman and chief executive officer, said in an interview. In meetings with financial analysts Tuesday, Mr. Notebaert and top Ameritech executives detailed plans to maintain solid earnings growth by introducing new services, making disciplined investments overseas and chopping $3 billion from a handful of areas.

The biggest cost savings -- about $1 billion by 2002 -- will come from technological advancements, which company executives said should make Ameritech's network and employees more efficient. For example, Ameritech is using "artificial intelligence" software to make sure that trucks aren't dispatched unnecessarily.

At a rate of about $600 million a year, the overall cuts would result in per-share savings of about 55 cents a share annually. Last year the company earned $2.14 a share, before one-time items.

The company will also trim costs the old fashioned way -- via facilities consolidation and job cuts. The company also told analysts that it plans to cut $590 million by reducing the number of customer-care centers to 15 from 17, closings the company announced earlier this month. It also plans to reduce its enhanced business centers to two, from 11, the company told analysts Tuesday.

As a result, the company will eliminate more than 1,000 positions. The residential customer-care center cuts will affect 794 positions, while the business-center closings, announced last fall, will eliminate 200 nonmanagement positions and 25 management jobs. An Ameritech spokeswoman said the company is "reviewing" the residential-center closings, however, at the request of local government officials. She added that the company tries to find new positions within the company for all its displaced workers.

Other cuts will come from extracting better supplier agreements and trimming costs in its fledgling cable-television construction project. Ameritech is building, from scratch, new cable-television systems in several markets in its five-state region.

"These are highly credible cost cuts," said William Vogel, an analyst at NationBanc Montgomery Securities. "They aren't cut-to-the-bone."

Mr. Notebaert said that not all the cost savings will go directly to the company's earnings. Some will go to "margin compression" as the local telephone business becomes increasingly competitive, for example. Analysts added the company probably will use part of the proceeds to pay for future mandated rate reductions.

The company also detailed plans to introduce new services and boost sales to small- and medium-sized businesses.