Ameritech Corp.

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Ameritech Corp.

founded: 1984

Contact Information:

headquarters: 30 s. wacker dr.
chicago , il 60606-7487 phone: (312)750-5000 fax: (312)207-1601 toll free: (800)327-9346 url: http://www.ameritech.com

OVERVIEW

One of the world's 100 largest companies, Ameritech serves customers in the 50 states and 40 countries. Ameritech provides advanced telecommunications services to nearly 12 million customers in Illinois, Indiana, Michigan, Ohio, and Wisconsin. These services include local exchange and toll service, network access and telecommunications products; cellular and other wireless services; leasing; directory and electronic advertising services; and interactive services (including Internet access). Internationally, the company has partnership operations in Canada, Hungary, Belgium, Denmark, Germany, New Zealand, Norway, Poland, and China. Ameritech also owns the world's largest maker of automated library systems (Ameritech Library Services) and the second largest security monitoring company (National Guardian).

Big changes occurred in the telephone service market with the passage of the Telecommunications Act of 1996, which created opportunities for competition in what was once a heavily monopolized industry. Long-distance carriers, such as AT&T (Ameritech's one-time parent) sought to enter the local telephone service market, while local service providers were looking to provide long-distance service. Ameritech offers long-distance service to its cellular customers and is still negotiating the hurdles it must overcome before it can offer long-distance services to the rest of its customer base. Because of the industry's regulatory environment, Ameritech must prove that local-service competition exists within its Midwest territory before it can enter the long-distance business.

COMPANY FINANCES

First quarter 1998 earnings for Ameritech were $4.1 billion (compared to first quarter earnings of $3.8 billion in 1997 and $3.5 billion in 1996). Total 1997 revenues for Ameritech were $15.9 billion, up 7.2 percent from 1996 revenues of $14.9 billion and 1995 revenues of $13.4 billion. The company's net income rose to $2.3 billion in 1997, compared to $2.1 billion in 1996 and $2.0 billion in 1995. This represents significant improvement over a 1994 net loss of $1.0 billion.

Ameritech's earnings per share rose by 8.3 percent, from $1.91 in 1996 to $2.14 per share in 1997. It was the sixth straight year that Ameritech's earnings per share (EPS) rose: in 1992 the company's EPS was $1.23; 1993, $1.37; 1994, $1.54; and in 1995, $1.71. As of May 1998, the company's EPS was $2.03.

Ameritech's year-end stock price for 1997 was $40.25, up 32.8 percent from $30.32 at year-end 1996. The 52-week high was $50.25 and the 52-week low was $30.12.

ANALYSTS' OPINIONS

The telecommunications business is expected to continue its trend of greater growth and competition, according to industry analysts on Wall Street. 1996 was a year of historic legislation in the industry, including deregulation of the local and long distance phone markets through the passage of the Telecommunications Act of 1996. As the long distance and local carriers cross into one another's markets, analysts predict continued consolidation within the industry. "You'll see more mergers because you've still got several companies hanging out there," said Alex J. Mandl, the former president of AT&T.

The excellent shape of this industry bodes well for Ameritech's continued growth. So far the company has a record 17 consecutive quarters of double-digit growth. However, according to Zacks investment services, 11 out of 24 analysts currently give the company a "hold" rating, recommending that Ameritech investors simply hold on to the stock they own for now. Of those 24, another 6 recommended a "strong buy" rating, 6 a "moderate buy," and 1 analyst rated the company a "moderate sell." Zacks also estimated Ameritech's growth rate for the next year and half between 8.67 and 10.19 percent.

HISTORY

Ameritech was once a property of long-distance giant AT&T, but in 1984 the company was spun-off as part of AT&T's anti-trust settlement. Ameritech was formed from 5 of AT&T's 22 telephone subsidiaries (Illinois, Indiana, Michigan, Ohio, and Wisconsin Bell) and 6 additional subsidiaries (Ameritech Services Inc., Ameritech Communications Inc., Ameritech Credit Corp., Ameritech Development Corp., Ameritech Mobile Communications, and Ameritech Publishing, Inc.). The company began operating on January 1, 1984 and in December of the same year purchased 19.9-percent interest in Cantel, a Canadian cellular phone company.

From the start, Ameritech pushed to become an international player, and over the next four years the company laid the groundwork for the creation of Ameritech International in 1989. In 1987 Ameritech started iNet, a company offering electronic mail and information services in partnership with Bell Canada and Telenet. In 1990 Ameritech was chosen, with Bell Atlantic, to purchase a $2.5-billion interest in New Zealand's public phone system. The next year it joined France Telecom and the Polish government to create a national cellular phone system in Poland. Also in 1991, Ameritech and Singapore Telecom joined to acquire 49.9-percent interest in Norway's NetCom GSM (cellular services).

Not all of Ameritech's growth has taken place overseas, however. In 1991, Ameritech bought Cybertel, a cellular firm in St. Louis; Knowledge Data Systems (data processing systems); and NOTIS (library information software systems). By 1993 the company was ready for a major restructuring—Ameritech was realigned and focused for the next three years on planning the company's future in video, long distance, and wireless services. Seeking to distinguish itself as a new telecommunications entity, Ameritech retired the Bell logo and unveiled its new Ameritech logo. Its first purchase of 1993 was a 15-percent share of MATAV, Hungary's telephone company.

In 1995 Ameritech, seeking to diversify, became the second largest U.S. security monitoring provider with its purchase of National Guardian Corporation. Back on the telecommunications field, Ameritech signed a five-year contract with WorldCom (the fourth largest U.S. long distance provider) in 1996 to sell Worldcom long-distance services. Also in 1996, a group of businesses called DSB Telecommunications (and led by Ameritech) became partners with Belgacom SA, the national telecommunications operator of Belgium. Early in 1997 Ameritech was the first Baby Bell to seek clearance to enter the long distance market, but later withdrew the request.

STRATEGY

Ameritech's primary strategy is to "speed growth in our core business." These core businesses all achieved double-digit growth in 1997. Ameritech's customer base for its cellular services grew 27 percent, paging services grew 31 percent, and the company saw 71 percent growth in sales of ISDN lines. Other core businesses include call management services and directory advertising. The company hopes to propel continued growth for Ameritech in core areas by expanding its sales channels and payment options for those services.

Expansion is a watchword for Ameritech. The company recognizes the enormous opportunities that are available in global competition and has sought to take advantage of those opportunities by creating strategic alliances throughout the world. "Driven by strong customer demand, new services and entry into new markets, Ameritech is entering an era of greatly expanded opportunity," said Richard C. Notebaert, chairman and chief executive officer of Ameritech. "Our success in sustaining double-digit growth while investing in high-potential businesses such as long distance and cable TV demonstrates both our disciplined strategic focus and our proven ability to execute in one of the world's fastest growing industries."

Ameritech's international businesses accounted for more than one-fourth of the company's earnings growth in the first quarter of 1997. Another of Ameritech's primary strategies, to "connect customers around the world," focuses on expanding its market for its core businesses into new international markets. According to its annual report, Ameritech is already the "largest U.S. investor in European telecommunications, with investments valued at more than $6 billion."

Ameritech also uses powerful marketing strategies to propel its growth rate. The company designs its business units around specific market segments and tends to those customers with defined marketing practices. The first of those is its sales force of 25,000-plus people making Ameritech products and services available in more than 1,100 retail stores. The company also relies heavily on "brand leadership," or how recognizable the Ameritech brand name is among the general public. The Ameritech name and logo appears on its trucks, directories, pay phones, and products. In addition, they offer a consolidated bill for Ameritech customers, in which all Ameritech services are billed in one location-cellular service, security, Internet access, and phone service. Finally, the company offers round-the-clock service to its customers. Through these mechanisms, Ameritech has achieved (according to its surveys) brand awareness of 95 percent in the Upper Midwest area.

FAST FACTS: About Ameritech Corp.

Ownership: Ameritech is a publicly held company traded on the New York Stock Exchange.

Ticker symbol: AIT

Officers: Richard C. Notebaert, Chmn., Pres. & CEO, 50, 1997 base salary $1,047,000; Oren G. Shaffer, Exec. VP & CFO, 55, 1997 base salary $500,000; W. Patrick Campbell, Exec. VP Corp. Strategy & Bus. Dev., 51, 1997 base salary $491,800; Barry K. Allen, Exec. VP Regional & Wholesale Operations, 41, 1997 base salary $417,900

Employees: 74,359

Principal Subsidiary Companies: Ameritech's affiliates include Americast (a joint venture with Bell-South Corp., SBC Corp., and Walt Disney), Belgacom (local, long-distance, cellular, and security services in Belgium), Centertel (cellular service provider in Poland), China Unicom, MATAV (long-distance and cellular service in Hungary), NetCom (cellular services in Norway), Tele Danmark (local, long-distance, cable, and cellular services in Denmark), and Telecom Corporation of New Zealand Ltd.

Chief Competitors: A major communications and regional holding company, Ameritech's most direct competitors include: Bell Atlantic; BellSouth; SBC Communications; and U.S. West Communications Group.

INFLUENCES

Ameritech counts among its successes (and strategies for growth) "new services for customers." The two most successful have been security services and cable television. The first, SecurityLink, installs, monitors, and services security systems and currently counts one million customers. Ameritech counts itself as the first and only company among its peers to establish such a strong presence in that market. Its cable television service has also proved a successful venture for the company. They currently offer services in Illinois, Michigan, and Ohio and have earned a 36-percent market share in areas where Ameritech's cable services are offered. One area in which Ameritech has not been able to extend its reach remains long-distance services. The company expected to be able to enter this market due to passing deregulatory legislation in 1997. However, regulatory agencies continued to restrict Ameritech from pursuing that goal, one that they hope to be able to reach in 1998.

CURRENT TRENDS

During the first three months of 1997, Ameritech continued making progress toward furthering its growth. The company reached an agreement to purchase Sprint's local communications business in part of Chicago and 10 of its suburbs. The deal adds 136,000 access lines to Ameritech's huge stable of access lines, which now number 19.9 million. The company is also continuing expansion of its Americast™ enhanced cable television service. It has added 5 cable television franchises since January 1997 and now owns 34 franchise agreements with communities covering more than 1.7 million people. Also, Ameritech signed an agreement with Teleglobe International, expanding the reach of Ameritech's long distance network to more than 240 countries and territories worldwide.

PRODUCTS

Services offered by Ameritech include: local telephone service; interstate network access; long distance; intrastate network access; product leasing (telephones, pagers, etc.); and directory, cellular, and interactive services (such as Internet access). Ameritech also offers its customers selected services including advertising, electronic business services (voice messaging, Caller ID, call waiting, etc.), interactive video, personal communications (wireless services including two-way paging), security monitoring, and managed services.

CORPORATE CITIZENSHIP

In 1996, Ameritech contributed over $25 million of its earnings to selected educational, civic, health and human services, and cultural nonprofit organizations. Of the total, $6.4 million was devoted to research, training, and innovative applications of communications technologies, and to programs for colleges to attract and retain qualified and diverse teachers and students.

In April 1997, Ameritech awarded a $650,000 grant to the Foundation for Independent Higher Education that allows private colleges across the country new opportunities to explore the benefits of telecommunications technology. The Ameritech Distance Collaboration Grant Program will award grants of up to $50,000 to groups of private colleges that propose innovative uses of technology and collaboration to improve their academic programs, business offices, and/or student services. These grants are a continuation of Ameritech's tradition of support for private higher education. Since 1994, Ameritech has contributed over $2.4 million to the state independent college associations in Illinois, Indiana, Michigan, Ohio, and Wisconsin.

CHRONOLOGY: Key Dates for Ameritech Corp.

1984:: Is spun-off by AT&T on January 1
1987:: Starts iNet
1989:: Ameritech International is created
1990:: Buys into New Zealand's public phone system
1991:: Begins joint ventures with Poland's and Norway's cellular phone systems; bought Cybertel, Knowledge Data Systems, and NOTIS
1993:: Purchases 15 percent of MATAV
1995:: Purchases National Guardian Corp.
1996:: Signs contract to distribute WorldCom
1997:: Applies for and then withdraws an application for clearance to enter the long distance market
1998:: Invested in Tele Denmark

Also announced in April 1997 was the awarding of $600,000 to 10 libraries across the United States through a partnership between the Library of Congress and Ameritech. The money will be used to digitize historically significant American collections of art and make them available for the first time on the Internet. This effort is the first to make unique collections from libraries across the United States available online via the Library of Congress to millions of children, students, educators, and teachers.

GLOBAL PRESENCE

Ameritech is the seventh largest communications company in the world. It offers local and long-distance telephone service, cellular service, phone directories, business purchasing guides, and wireless services in Austria, Belgium, Croatia, the Czech Republic, Denmark, Germany, Hungary, Luxembourg, the Netherlands, Norway, Slovakia, Slovenia, and Switzerland. Ameritech's strong global presence includes strategic partnerships with select international companies.

In January of 1998, Ameritech finalized a $3.1-billion investment in Tele Danmark, which will eventually give Ameritech a 42-percent stake in the company. Other alliances include: Atlantic Canada On-Line; Belgacom SA in Brussels and Belgium; Matav (MTA), Hungarian Telecommunications Company in Budpest; NetCom GSM in Oslo, Norway; and China Unicom. Ameritech is also a partner with GE Information Services providing worldwide communications systems. While currently heavily invested in Telecom Corp. of New Zealand, Ameritech announced in late 1997 that they would be selling off shares in that company to the public. They plan to use finances from that sale toward further expansion in North America and Europe.

EMPLOYMENT

According to Ameritech's web site, "Our commitment to employees is to balance our business objectives with employee's needs for security and protection through total compensation." Ameritech does this by offering employees compensation through a base salary, annual bonus, and benefits. In addition, each employee is offered the chance to become a shareholder in the business, an offer of which 75 percent of Ameritech employees take advantage. The company sees its own responsibility to train employees effectively to make smart business decisions. They also trust that the proper training and support will allow employees to make decisions that benefit the company and its shareholders.

The company also sees diversity as one of its primary goals and defines that term as, "the process of recognising, understanding, valuing and utilizing all the ways in which we differ." That definition includes not only hiring practices, but the ways in which employees work, the contributions they make, and the environment and resources they need to achieve company goals.

SOURCES OF INFORMATION

Bibliography

"american history from across u.s. to go on-line through library of congress/ameritech awards." pr newswire, april 1997.

"ameritech corporation." microsoft investor, 6 may 1998. available at http://investor.msn.com/invsub/analyst/recomnd.asp?symbol3dait.

ameritech corporation. notice of 1998 annual meeting and proxy statement. 27 february 1998.

ameritech corporation 1998 annual report. chicago, il: ameritech corporation, february 1998.

ameritech home page. 7 august 1998. available at http://www.ameritech.com.

"ameritech and sprint announce agreement: ameritech to purchase sprint chicago suburb local communications business assets." pr newswire, april 1997.

"ameritech announces national distance collaboration grants for independent colleges." pr newswire, april 1997.

"baby bell sbc asks fcc to ok long-distance service in oklahoma." associated press, april 1997.

"benefits," 7 august 1998. available at http://data.ameritech.com/ame_emp/bene.html.

"diversity," 7 august 1998. available at http://data.ameritech.com/ame_emp/diver.html.

landler, mark. "year of intense activity looms for phone industry, experts say." the new york times, january 1997.

For an annual report:

on the internet at: http://www.ameritech.com/investor/annuals/1997/index.htmor write: ameritech shareowner services c/o first chicago trust company of new york, po box 2558, jersey city, nj 07303-2558.