Verizon aided by growth in wireless unit
Verizon Wireless added 2.3 million customers, most of them prized monthly subscribers, to put a shine on a fourth quarter in which Verizon Communications Inc.’s profit was cut by restructuring costs.
In reporting the 38% drop in quarterly profit Monday, Verizon Communications emphasized that growth in its DSL and new FiOS Internet businesses had outpaced the loss of traditional telephone customers.
In the final three months of 2006, Verizon earned $1.03 billion, or 35 cents a share, down from $1.66 billion, or 59 cents, in the fourth quarter of 2005.
The latest figures reflect a charge of $541 million, or 19 cents a share, for taxes triggered by the sale of Verizon’s operations in the Dominican Republic. It also included 3 cents a share for costs related to the spinoff of the company’s phone book and online directories business, as well as 5 cents in charges for severance, pension, merger and headquarters relocation expenses.
Excluding those charges, Verizon earned 62 cents a share, edging past the average forecast of 61 cents among analysts surveyed by Thomson Financial.
The directories spinoff and the Dominican divestiture were geared to bolstering Verizon’s financial posture as it invests billions in upgrading its copper phone network and prepares for the day when cellular partner Vodafone Group decides to sell its 45% share of Verizon Wireless.
Fourth-quarter revenue totaled $22.6 billion, a 26.1% increase from the same period in 2005, though a big chunk of that gain came from the acquisition of the MCI long-distance business in early 2006. About $10.1 billion came from the cellular business, up 16.3% from $8.69 billion a year earlier.
Despite the near-record customer growth, it was a rare quarter in which Verizon didn’t narrow the gap with AT&T; Inc.’s cellular business. Verizon’s gain of 2.3 million customers gave it 59.1 million at the end of 2006. The AT&T; unit, formerly Cingular Wireless, grew by 2.4 million customers during the holiday quarter to nearly 61 million.
That said, the vast majority of Verizon’s new customers were monthly subscribers, whereas a third of AT&T;’s fourth-quarter gain consisted of “pay-as-you-go” users who tend to generate less revenue and switch providers more frequently. Overall, Verizon Wireless now has 56.8 million monthly subscribers, equaling 96% of its base.
“We take in two [cellular] customers for every one we hand over to our competitors,” Dennis F. Strigl, the company’s new president and chief operating officer, said in a conference call after the report. “We have no intention of slowing down our growth. Our intention is to take share quarter after quarter.”
On the nonwireless side, fourth-quarter revenue totaled $12.73 billion, down 3.5% from a year-earlier tally that was adjusted to include the MCI business.
Another positive sign, Verizon said, was that the consumer operation’s loss of 366,000 residential phone lines was more than offset by a gain of 409,000 broadband Internet lines for a year-end total of about 7 million.
The broadband growth included 165,000 new customers for FiOS Internet, the high-capacity fiber-optic system that Verizon is installing across half its local phone network in place of copper phone wires at a cost of $23 billion.
Full-year earnings for 2006 came to $6.2 billion, or $2.12 a share, on revenue of $88.14 billion. In 2005, profit totaled $7.4 billion, or $2.67 a share, on revenue of $69.52 billion.
Verizon shares rose 20 cents to $38.03.
