Verizon Profit Rises, Weathers Economic Slowdown

 
 
By Reuters -  |  Posted 2008-04-28
 
 
 

NEW YORK, April 28 (Reuters) - Verizon Communications Inc (VZ.N: Quote, Profile, Research) reported on Monday a higher quarterly profit on stronger-than-expected growth in wireless subscribers, showing resilience in the face of a U.S. economic slowdown.

Shares in Verizon, the second-largest U.S. phone company, rose 1.9 percent after the results showed Verizon Wireless, a mobile venture with Vodafone Group Plc (VOD.L: Quote, Profile, Research), added 1.5 million net new subscribers in the first quarter.

That exceeded the average estimate of 1.42 million additions from six analysts contacted by Reuters.

"Wireless was the star," said Craig Moffett, analyst at Sanford C. Bernstein & Co.

He and other analysts noted, however, that Verizon's home-phone business suffered a dramatic drop as customers switched to cell phones and rival services from cable operators, similar to trends at industry leader AT&T Inc (T.N: Quote, Profile, Research).

Verizon said first-quarter profit rose to $1.6 billion, or 57 cents a share, from $1.5 billion, or 51 cents a share, in the year-ago quarter.

Profit after adjusting for costs such as the spin-off of some wireline assets was 61 cents a share, matching the average forecast on Wall Street according to Reuters Estimates.

Revenue rose 5.5 percent to $23.8 billion, also in line with analysts' expectations.

Chief Executive Ivan Seidenberg said the results showed "Verizon has weathered the current economic uncertainty."

Wireless revenues rose 13.2 percent to $11.7 billion, boosted by demand for advanced, data services.

Churn, the industry term for cancellations, was 1.19 percent. The rate of churn among post-paid users, or those who pay monthly fees, was 0.93 percent.

Verizon said the launch of its $99 unlimited wireless calling plan, a move that was quickly followed by AT&T and triggered concerns of a price war ahead, had not dragged down revenue as many analysts had feared.

"I'd kind of like to put this issue to rest," Chief Operating Officer Denny Strigl told Reuters. "It was accretive to revenue."

LINE LOSSES

In contrast to the strong wireless results, residential access line subscriptions fell 10.9 percent from a year earlier. Wireline operating revenues fell 1.4 percent from a year earlier to $12.3 billion.

That was similar to AT&T, which announced last week that it added 1.3 million net wireless subscribers in the first quarter but suffered a heavy fall in residential phone users.

Like AT&T, Verizon said it was able to buffer the fall in traditional phone subscriptions with growth in high-speed Internet subscribers.

The company said it had a total of 8.5 million broadband customers at the end of the quarter, up 14.9 percent.

That included users of both DSL and FiOS, an advanced service based on an all-fiber network that can also deliver high-definition video.

Verizon said it added 263,000 FiOS TV customers, bringing the total to 1.2 million.

"Our plan to roll out FiOS Internet and video is beginning to pay off for us," Strigl said. "We knew that our historic dependence on voice needed to shift to broadband and data. And we're able to offset that erosion we're seeing in voice through data and FiOS."

Verizon shares rose to $37.75 from their previous close of $37.04 on the New York Stock Exchange. (Additional reporting by Sinead Carew; Editing by Steve Orlofsky)