Verizon Feels the Wireline Drag

Verizon Communications Inc. (NYSE: VZ) today reported that its net income fell 7 percent during the second quarter, even as revenues rose, as the company counted the cost of wireline declines.

Verizon's top line was boosted by revenues from newly acquired wireless operator Alltel. The operator's net income, however, was hurt by a decline in demand from wireline business customers and by layoff and pension costs.

Nonetheless, excluding special items (mainly around job cuts), Verizon says it earned $0.63 per share, beating Thomson Reuters analyst forecasts by a penny.

Table 1: Verizon Q2 Earnings
2Q08 2Q09 Change (%)
Revenues ($B) 24.1 26.86 11%
Net Income ($B) 3.400 3.160 -7%
EPS ($)* 0.66 0.63 -5%
Source: Verizon Communications
*Non-GAAP; excluding special items

Verizon expects economic pressure on its business "to continue in the second half of the year," CFO John Killian said during a conference call today

This means the company will continue to look cut costs on the wireline side throughout 2009. The firm has already cut 8,000 jobs and expects to cut another 8,000 this year, mainly in the third quarter.

"We are looking at all other areas of expense also," Killian said.

Wireless & FiOS: the usual bright spots
Repeating a pattern seen over the last few quarters, Verizon's wireless business and its FiOS high-speed Internet and TV deployment continued to post good results during bad economic times.

Verizon Wireless , the company's joint venture with Vodafone Group plc (NYSE: VOD), posted revenues up 28 percent yearly. The wireless operation reported Friday that it added 1.1 million new subscribers in the second quarter. (See Verizon Lags AT&T in Q2 Subs Game.)

Verizon COO Denny Strigl said the operator had seen some impact from AT&T Inc. (NYSE: T)'s flagship 3GS iPhone launch but claimed that the Apple Inc. (Nasdaq: AAPL) smartphones have expanded the overall market for such devices. Strigl said Verizon plans to launch its first Android phone this year, "refresh the [RIM] Storm," and add the Palm Inc. Pre early next year. (See AT&T's Q2 Profit Lowered by iPhone Launch.)

Verizon didn't offer much news on its coming Long-Term Evolution (LTE) build-out plans. Strigl said the operator expects to have the technology in 30 markets by the end of 2010.

FiOS had another robust quarter. Verizon added 300,000 TV customers and 303,000 Internet customers, a growth of 60.3 percent compared to the same quarter last year. The average revenue per FiOS customer was more than $135 a month.

"We're taking market share from cable," CFO Killian said of FiOS, adding that 20 to 25 percent of FiOS customers have moved from Verizon DSL.

Nonetheless, wireless and FiOS haven't proved enough of a bright spot for Verizon's investors in Monday morning trading. Verizon's stock fell by $0.94 (3%) to $30.56 after the quarterly report.

— Dan Jones, Site Editor, Unstrung

lrmobile_Messenger 12/5/2012 | 3:59:49 PM
re: Verizon Feels the Wireline Drag How many wire lines did Verizon lose this quarter? How many did AT&T?
GreenPoisonFrog 12/5/2012 | 3:59:44 PM
re: Verizon Feels the Wireline Drag

Verizon reported a decline from 38,084k to 34,313 year over year (9.9%) for all wireline connections (includes residential, business, and public).

VZ reported a decline from 22,416k to 19,655 (12.3%) for residential.

AT&T reported a decline from 29,349 to 26,008 (11.4%) for residential.

Not necessarily comparable directly.  Info sourced from VZ and T earnings releases from their web sites.


lrmobile_Messenger 12/5/2012 | 3:59:36 PM
re: Verizon Feels the Wireline Drag Thanks! Those are significant drops.
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