Baby Bells’ Newest Services Boost Profits

Pacific Telesis Group and other regional telephone companies on Tuesday reported strong fourth-quarter results, powered by growing demand for Internet phone lines, wireless and other services such as caller ID and call waiting.

While the marketplace is growing quickly, the companies’ shares continue to be overshadowed by the uncertainties of head-to-head competition with long-distance companies, which are hoping to gobble up major chunks of the local phone markets at the end of the year.

Pacific Telesis, SBC Communications Inc., Bell Atlantic Corp. and Nynex Corp. are racking up profits from caller ID, voicemail and other products that are two to three times more profitable than local phone service.

The four Baby Bells, on the verge of combinations that total almost $40 billion, are plowing the money into efforts to battle AT&T; Corp. and others in the lucrative long-distance arena.

Pacific Telesis led the pack with a 22% profit surge as eight million customers in its California and Nevada markets use custom features.

SBC Communications, which plans to buy PacTel in a $16-billion deal, saw profit rise 7.5% with more than a third of its customers using caller ID.

San Francisco-based PacTel had fourth-quarter profit from operations of $282 million, or 66 cents a share, up from net income of $231 million, or 54 cents, in the year-earlier period. Wall Street expected earnings of 58 cents.

SBC’s net income rose to $542.9 million, or 90 cents a share, from profit from operations of $505.2 million, or 83 cents. The 1995 results include a gain and charges. It was expected to earn 91 cents.

Nynex boosted earnings by 10%. The New York company, set to be acquired by Bell Atlantic this quarter in a deal valued at $21.9 billion, added lines at a record pace. Bell Atlantic’s profit climbed 7.3% on surges in voicemail and caller ID.

Profit from operations at Nynex rose to $416.5 million, or 95 cents a share, from $378.7 million, or 88 cents, a year earlier. Results beat an average estimate of 94 cents a share.

Nynex’s operating expenses fell to $2.62 billion from $2.81 billion as it focused on improving its service--an important step in the planned combination with Bell Atlantic.

Bell Atlantic’s profit from operations rose to $424.4 million, or 97 cents a share, from $395.4 million, or 90 cents. The results matched the average estimate of 97 cents.