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Ameritech To Cut 5,000 Jobs

April 14, 1998

CHICAGO (AP) _ Ameritech Corp. said Tuesday it will cut 5,000 jobs, or about 7 percent of its work force, as part of a plan to slash expenses by $3 billion over the next five years and boost profits.

The company, which earlier in the day posted an 8 percent drop in first-quarter profits, said the workers would come from its cellular and home-security divisions.

However, spokesman Jerrell Ross declined to elaborate on where the bulk of those workers are based or whether any of the cuts would come through attrition.

Chicago-based Ameritech has 73,000 workers worldwide in such fields as local and long-distance telephone service, cellular, paging, Internet access and security-monitoring.

The parent of local phone companies in Illinois, Indiana, Michigan, Ohio and Wisconsin, Ameritech has been expanding its range of services to boost revenue as competitors enter the local phone market for the first time, cutting into its monopoly.

Ameritech took a $64 million charge in the first-quarter to pay for the cost-cutting program and its 42-percent stake in Denmark’s phone company, Tele Danmark.

In its earnings, Ameritech reported its 18th consecutive quarter of earnings growth of 10 percent or more, excluding the charges taken.

But its cellular operations showed slower growth, adding only 168,000 customers in the first quarter, compared to 197,000 in the year-ago period. The company lowered its wireless prices to fend off the competition.

The Baby Bell is beginning to ``feel squeezed by the competition and is taking prudent steps to minimize any losses as much as they can,″ said analyst Anthony Ferrugia at A.G. Edwards.

Ferrugia noted Ameritech’s earnings have been bolstered in recent quarters more by acquisitions than growth in its core local and cellular phone businesses, requiring it to either keep up a frantic pace of acquisition or begin trimming some of the fat from certain businesses.

``One of the ways to increase your margins is to take some people out of your business,″ Ferrugia said. ``It’s not because (Ameritech chief executive Richard) Notebaert is being greedy ... it’s what they and every Baby Bell is going to have to do to survive long-term.″

Ameritech provides wireless transport of voice, data and video, plus certain call management services, to about 3.2 million cellular customers in Illinois, Indiana, Hawaii, Michigan, Missouri, Ohio and Wisconsin. It also has been working to expand its ClearPath digital cellular service.

SecurityLink from Ameritech offers a full array of security products and services for homes and businesses, including burglar and fire alarm systems, personal emergency response service, closed circuit TV and electronic access control.

Ameritech’s SecurityLink is North America’s second-largest security monitoring provider in a $15 billion market, currently serving more than 1 million residential and business customers.

Union leaders from the International Brotherhood of Electrical Workers, Communications Workers of America and unions in Belgium, Hungary and Denmark, where Ameritech holds a large stake in phone companies, were expected to attend the company’s annual shareholder meeting Wednesday in Chicago. Union members also were scheduled to protest outside.

For the three months ended March 31, Ameritech’s net income fell to $492 million, or 44 cents a diluted share, from $536 million, or 48 cents a diluted share, the comparable period a year earlier.

Excluding charges, the earnings would have been $590 million, or 53 cents a diluted share, which matched Wall Street expectations. Ameritech’s stock slipped $1, or 2.2 percent, to $45.06 a share on the New York Stock Exchange.

Revenues for the quarter rose 7.1 percent to $4.1 billion from $3.9 billion.

Ameritech said it saw 21 percent growth in services such as caller ID, call waiting and voice messaging and a 63 percent jump in installation of high-speed Internet access lines.

Such services are lucrative for phone companies because they can add significantly to a customer’s bill at little cost to the company.

Ameritech also said that one-fourth of its earnings growth came from Belgium, Denmark and Hungary. The company has been building its investments in European phone markets while other U.S. phone companies have been merging with or buying out competitors.

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