Verizon Profit Off 59% in Quarter

Pressured by competitors and changing consumer habits, Verizon Communications Inc. needed all the double-digit growth it could get from its industry-leading wireless unit to post flat revenue for the third quarter.

Net income for the nation’s largest telephone company fell 59% to $1.8 billion, or 64 cents a share. But last year’s third-quarter earnings of $4.4 billion, or $1.60 a share, were boosted by one-time gains from the sales of businesses and tax benefits.

Verizon, California’s second-largest local phone company, said its revenue rose slightly to $17.2 billion from $17.1 billion last year.

Sales at Verizon Wireless grew 18% to $5.9 billion from $5 billion a year ago. The unit, a joint venture with Vodaphone Group in Britain, added 1.3 million net new customers in the quarter, a 12.5% hike from a year ago, to give it a total of 36 million customers.

But the unit’s success wasn’t enough to convince Wall Street that the company could overcome continuing losses of consumer and business access lines. The stock fell 15 cents to $33.08 on the New York Stock Exchange. The stock has lost 14.6% of its value this year.

“Investors are focused on the accelerated pace of losses of retail access lines,” said F. Drake Johnstone, analyst at Davenport & Co. in Richmond, Va. “Not only is the pace of the losses getting worse, they’re actually obtaining lower revenue per line.”

The number of residential lines in the third quarter fell 3.5% from a year ago to 36.5 million, while business lines dropped 4.6% to 19.2 million. Overall, Verizon had 56.2 million retail lines at the end of the quarter, down 3.9% from a year earlier.

Like the other Baby Bells, Verizon has lost access lines as customers switched phone service to wireless and cable companies. Customers also have canceled second and third phone lines after adding high-speed DSL service, which can handle voice and data traffic.

In addition, long-distance companies and other rivals are taking high-margin local customers away by leasing the Bells’ lines and gear at regulated wholesale prices -- which the Bells say are below their costs -- and selling local service under their own brand names.

“It’s hard to turn the ship around when it’s under such assault,” Johnstone said. “And next year, the big issue will be the cable companies offering Internet telephony with unlimited calls anywhere for $35 a month.”

Verizon Chief Executive Ivan Seidenberg said the company was improving its competitive position by growing newer areas of the business, including wireless, long-distance and DSL.

“The composition of our overall revenues continues to shift to newer, nontraditional sources,” he said.