Verizon Earns $3.9 Billion Despite Flat Sales in Quarter

Boosted by its growing wireless operation and a one-time gain, Verizon Communications Inc. reported earnings of $3.9 billion for the first quarter despite overall flat sales in a weak economy.

The nation’s largest local phone company said Tuesday that its earnings, amounting to $1.41 a share, also benefited from growth in long-distance service in the 13 East Coast states and the District of Columbia where it is the primary local carrier.

The New York-based company lost $501 million, or 18 cents a share, in the first quarter last year. Quarterly sales slipped to $16.3 billion from $16.4 billion.

Verizon is California’s second-largest local phone company, well behind SBC Communications Inc. But Southern California beach communities help make the state the fourth-largest market for Verizon.

Although it still is the dominant local carrier in those areas, Verizon is bracing for competition after state regulators last month reduced the wholesale rates it can charge rivals.

Verizon, which last week asked the Public Utilities Commission to reconsider its order, is preparing an aggressive campaign in May to retain customers, said Timothy J. McCallion, president of Verizon’s Pacific region. The company will offer new packages of bundled services, including the Veriations one-rate plans that are gaining customers on the East Coast.

The company’s first-quarter results included a one-time gain of $2.1 billion, or 77 cents a share, from the adoption of a new accounting rule on retirement obligations. Without the gain, it would have earned $1.8 billion, or 63 cents, which was in line with what analysts expected.

Verizon stock gained 82 cents to close at $33.99 on the New York Stock Exchange.

Analysts generally said the company did well under the circumstances.

“The economic climate is still weak for new telephone services. They’re doing ... as well as can be expected in a very difficult environment,” said Craig Nedbalski, managing director of Victory Capital Management, a Cleveland asset management firm that owns shares of Verizon.

Though the company faces many of the same issues -- such as rising competition from wireless services and low regulated wholesale rates -- that plague Baby Bell companies SBC and BellSouth Corp., Verizon “has differentiated itself somewhat from its peers,” analyst Richard G. Klugman at Jeffries & Co. wrote in a note to investors.

One key, he said, is its Verizon Wireless unit, in which it holds a 55% stake. The nation’s largest cellular phone company grew 12.6% year to year, adding 3.7 million customers.

The unit’s sales, which rose 15% to $4.7 billion, accounted for 29% of the parent company’s revenue. In last year’s first quarter, Verizon Wireless accounted for 25% of revenue.

Competition has hurt Verizon’s older wire-line business. The carrier lost 467,000 basic business and residential phone lines during the first quarter, pushing sales down to $9.9 billion from $10.3 billion.

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Reuters was used in compiling this report.