Verizon Profit Jumps to $1.8 Billion

Verizon Communications Inc., the nation’s largest phone company, said Tuesday that it had posted increases in second-quarter revenue and profit as growth in its wireless business helped offset a continuing slump in its traditional land-line business.

Verizon, California’s second-largest phone operator, said earnings were $1.8 billion, or 64 cents a share, up significantly from $338 million, or 12 cents, a year earlier.

Revenue for the New York-based company rose 6% to $17.8 billion from $16.8 billion.

“It’s very unusual for the largest company in the field to also be growing the fastest,” said Albert Lin, an analyst at American Technology Research in San Francisco. “Markets like that.”

Investors bid Verizon shares up $1.36 to $37.86 on the New York Stock Exchange.

Also boosting the stock was AT&T; Corp.’s decision last week to exit the residential phone business, a market that has accounted for 22% of Verizon’s revenue. Since AT&T;’s announcement Thursday, Verizon’s shares have gained 10%, Lin noted.

Other regional phone companies also have seen a bump since the announcement.

Shares of SBC Communications Inc., California’s dominant phone company, have risen 8%, while BellSouth Corp.’s also have gained 8% and Qwest Communications International Inc.’s have gained 5%.

“Over the next two-and-a-half years, we’re looking at AT&T; to potentially give up $2.5 billion in local and long-distance revenue,” said David Barden, analyst at Banc of America Securities, which has done investment banking for Verizon. “It’s a material number, and it’s up for grabs.”

Doreen Toben, Verizon’s chief financial officer, declined to comment during a call with analysts on how AT&T;’s exit would affect Verizon’s financial future. But company spokesman Robert Varettoni later hinted that Verizon was eager to go after AT&T; residential customers.

“Our focus is the consumer,” Varettoni said. “To the extent that we can capture more consumer market share, we’d be very interested in that.”

The residential phone market has witnessed stiff price competition as consumers increasingly use their cellphones to make local and long-distance calls.

Verizon’s land-line business, which contributed 40% of the carrier’s overall revenue, fell 3% to $9.6 billion from the same quarter a year earlier. Verizon operates 4.5 million lines in California, its fourth-largest market after New York, New Jersey and Pennsylvania, respectively.

“The wire-line business is fundamentally stagnant, at best,” said David Willis, an analyst with the Meta Group, a research firm that has done consulting work for carriers including Verizon. “We’ll see a continued decline there.”

Even with AT&T; out of the picture, Verizon faces competition from cable companies and firms that provide voice communications over the Internet, Willis said.

To retain customers, Verizon is spending $1 billion this year to hook up 1 million homes -- including several thousand in Huntington Beach, Azusa, Baldwin Park and elsewhere in Southern California -- with fiber-optic cables that can deliver high-speed Internet access, digital television and inexpensive phone service.

The erosion in Verizon’s land-line business was offset by its wireless business, in which revenue grew 25% to $6.8 billion from a year earlier.

The carrier, which co-owns Verizon Wireless with Vodafone Group in Britain, added 1.5 million new subscribers for a total of 40 million customers, or roughly 25% of the U.S. cellphone market.

“Verizon Wireless is clearly consolidating their position as the premier wireless provider in the U.S.,” analyst Barden said.