CONTACT: Bruce Kushnick, 212-777-5418 To Read a Copy in Word (with Footnotes) To Read a Copy as a PDF File FOR IMMEDIATE RELEASE: New Special Report: BELLSOUTH, QWEST, SBC AND VERIZON'S REVENUES, EXPENDITURES AND PROFITS: THE BELL COMPANIES ARE MISLEADING CONGRESS, THE FCC, AND THE PUBLIC WITH A SHELL GAME OF STATISTICS. New York --- According to Bell companies' recent statements, the sky is falling. The Bell companies claim that there has been a dramatic downturn in revenues, profits, losses from competition, and even the number of phonelines is declining. However, the American public is still using their local phone services. They are still going online and the overwhelming majority of America's business and residential customers still pay their local phone Bell "monopolies". "As this new report clearly demonstrates, the Bells are misrepresenting their business problems so that they can receive regulatory relief from Congress and the FCC, and higher prices for local phone services. The Bells are still some of the richest companies in America, and prices, for both local phone customers as well as competitors, should be declining," states Bruce Kushnick, Executive Director, New Networks Institute. Let the facts speak for themselves. Here are the highlights: (NOTE: The primary source of these statistics are the Bell SEC filings.) Overall Revenues and Profits -The Bells profits are still beyond anything that could be considered fair and reasonable for companies that are monopolies. Verizon, BellSouth and SBC had 122% higher return on equity than the Business Week Corporate Scoreboard for 2001. Instate local Bell return on equity went up 40% since 1996. Bell revenues from 2000-2001 increased --- Telecom and Directory generated $60 billion in cash. Yellow Pages and Directory have a 57% profit margin in 2001, making it one of the most profitable businesses in the US. 90% of all profits come directly from monopoly customers ---Local phone service is financing the other lines of business. SBC's second quarter 2002, shows dividends are up since 2001, "Free Cash Flow" went up 277%, expenses, including capital expenditures and employees are decreasing further while profits per-phone line increased. Major Cuts in Expenses Should Be Leading To Lower Prices. Phone prices should be declining because the two major costs, construction and staff, are decreasing sharply. 107,000 cuts in staff in the last two years, mostly from the local phone companies. 50% drop in capital expenditures/construction, which will affect security and competition. The Competitive Threat Remains Relative Small Overall, only 6.9% of the RBOC lines are used by CLECs to provide resale or "UNE-P" competition. Executive Compensation - A Primer in Corporate Greed (See the "Special Report" on Executive Compensation) Since 1999, the top executives from the Bell companies received an estimated 54 million shares of stock options, with a value estimated by the Bell companies of $1 -$2.1 billion dollars ---almost 10% of all stock options. As a group, the top 4 executives made $160 million dollars in salaries and bonuses, and an additional 25.5 million shares of stock options, worth an estimated $404 -$818 million. Since 1999, Ivan Seidenberg, Verizon's CEO, made $54 million in salary, bonus and retirement funds, as well as stock options of 2.6 million shares, estimated value between $83-215 million dollars. Executives can get free personal use of aircraft, apartments, spending money for "club" memberships, and "golden parachutes" worth millions of dollars. Who Controls the Board of Directors? The Bell Tell Retirees claim that Verizon's Board of Directors is "infested with conflicts of interest", who control the executive pay and perks. The Number Of Overall Phonelines Is Not Going Down. The overall growth of phonelines is NOT going down. It is going up. There has been a 13% increase in "Voice Grade Equivalents" in 2001 and most of the Bells do not count data lines, including DSL in their equations. The loss in new copper wire installations has been impacted by a number of items including "Line-Sharing", where the DSL service goes over the same copper wiring and doesn't require a 'second-line'. Why do 25% of US homes have to purchase a second installed line into their home when a service to provide two voice channels could have been done saving hundreds of dollars? Care about Rural Customers? In 2001, Verizon sold approximately 1.3 million lines in rural areas. Overseas Investments and Write-offs. (See the "Special Report on Foreign Investment") Where's all the Bells' profits going? Not in construction, but it is paying for massive overseas losses and domestic write-offs. $15.6 billion in losses and write-offs for investments overseas since 1999. $16 billion in write-offs for the mergers and domestic losses since 1999. $9.7 billion in write-offs and losses in first half of 2002 - major losses in South America. Customers Paid For A Fiber-Optic Broadband Network They Will Never Receive. Customers in most states paid for broadband networks they will never receive through higher phone prices. Pennsylvania is holding Bell accountable for their promises to provide a fiber-optic wire with speeds of 45mps (in both directions) to 50% of rural and urban customers' homes by 2004. We estimate that $3.5 billion was already collected in the state, counting excessive phone charges and tax write-offs. "There is a recession at hand and every company is having its problems. However, It is clear the Bells' have decided to give the public, the press, and regulators a distorted picture of their current health so that they can get more financial relief, and higher prices for local phone customers and competitors using the Bell networks. Let the data speak for itself. The Bells are some of the richest companies in America and prices should be declining. The Bell executives should be held accountable to tell the whole truth, not just what they think is politically appropriate." adds Kushnick. For more information contact Bruce Kushnick at 212-777-5418 or bruce@newnetworks.com. To see a full copy of the report se http://www.newnetworks.com/profitreport2002.htm