Verizon 2Q Net Up 12%; Wireless Offsets Weak DSL

Published on: 28th July 2008

NEW YORK -(Dow Jones)- Verizon Communication's second-quarter net income rose nearly 12% as continued strength in wireless covered for steep declines in its traditional landline and DSL businesses.

The New York telecommunications company Monday reported second-quarter net income of $1.88 billion, or 66 cents a share, compared with a year-earlier profit of $1.68 billion, or 58 cents a share.

Excluding one-time items, Verizon earned 67 cents a share.

Revenue, meanwhile, rose slightly to $24.12 billion from $23.27 billion a year ago.

While earnings exceeded Wall Street's earnings estimate of 65 cents a share, revenue fell short of analysts' projection of $24.18 billion.

Shares traded at $34.45 in recent premarket activity, flat with Friday's close.

"You're seeing a marked difference between Verizon and AT&T in terms of economic impact," said Christopher King, an analyst at Stifel Nicolaus & Co. Inc. "Verizon doesn't seem to be seeing that at all."

Wireless was again the driver. The company said that essentially all of its previously reported 1.5 million net new wireless customers signed long-term contracts, indicating it was taking a larger share of the industry's more valuable customers at a time when more than four out of every five consumers already own a cellphone. Verizon Wireless, a joint venture with Vodafone Group, reported its turnover rate fell to an industry-low of 1.1%.

"Wireless really continues to be stunningly impressive," King said.

Verizon Wireless will be turning up the pressure on the industry when it completes its $28.1 billion acquisition of Alltel Corp., expected by the end of the year. The merger will make it the largest U.S. carrier by subscriber base.

The landline business, however, was far less impressive. It's most high-profile service, FiOS TV, added 176,000 net new customers. Bank of America had projected 260,000 net new additions.

While Verizon added 187,000 FiOS Internet customers, it lost 133,000 DSL customers, bringing its net broadband additions to 54,000. The second quarter is typically a weaker period as college students tend to disconnect their lines when going home for the summer. Verizon has had to face a slumping DSL business as it shifts its focus to FiOS.

The number of total switched access lines fell 8.5% to 38.3 million.

In addition to a deteriorating landline business, Verizon faces the prospect of a strike. Its existing contract with 50,000 Communications Workers of America workers expires on Aug. 2, and the union members have already authorized a strike.

Several thousand CWA members staged a demonstration in front of the Verizon headquarters in downtown Manhattan on Saturday, blanketing the streets in a sea of red shirts and protest signs seeking better healthcare and job security.

While the two sides have been bargaining for several weeks, "right now, we're disappointed by the pace of progress," said Bob Master, a spokesman for the CWA.

-By Roger Cheng, Dow Jones Newswires; 201-938-2020; roger.cheng@dowjones.com

(END) Dow Jones Newswires

 

Tags: [verizon wireless]  [verizon]  [alltel]  [landline]  [communications workers of america]  [new york]  [union]  [cwa]  [pace]  [fios]  [students]  []