NEW YORK -(Dow Jones)- Verizon Communications entered the new year with "excellent momentum" after investing in several growth areas in 2005, according to Chief Financial Officer Doreen Toben.
Customers responded to Verizon's various products - both its wireless and high-speed Internet connections saw record subscriber growth in the period, Toben said during a conference call to discuss its quarterly results.
"These key growth areas are becoming an increasingly large piece of our total revenue," she said.
Verizon made significant investment in its third-generation wireless technology EV-DO, which enables faster download speeds and higher quality music and video features, as well as in its higher speed fiber network project FiOS.
Toben said customers are demanding more bundles, which package multiple services together under one bill.
The New York regional phone company reported fourth-quarter net income of $1.7 billion, or 59 cents a share, down from $3 billion, or $1.08 a share, from a year ago. Results were weighed by changes to the management retirement plans, as well as severance and relocation costs. Excluding items, earnings came in at 64 cents a share, in line with Wall Street's average estimate.
Revenue, meanwhile, rose to $19.33 billion from $18.26 billion a year ago on the strength of its wireless business.
Verizon backed its prior capital expenditure forecast of $15.4 billion to $15.7 billion for the year, but added that including the integration of recently acquired MCI Inc., the company would spend $17 billion to $17.4 billion.
"These investment position us for growth in the markets; EV-DO and FiOS are both gaining scale and customers," Toben said.
Helping results was the strong growth in Verizon Wireless, which is jointly owned with Vodafone PLC. The carrier added two million net new subscribers, while total customer turnover was 1.2%.
"The Verizon Wireless machine is hitting on all cylinders," she said.
Verizon's capital investments and growth initiatives will diversify the company's revenue profile and mitigate its competitive risks, Chief Financial Officer Toben said during the conference call.
On the broadband end, Verizon added 613,000 customers for a total of 5.1 million.
"There's a lot more opportunity in broadband in 2006," she said.
Toben said Verizon is ahead of schedule on the penetration of its fiber project FiOS. The company expects to achieve 30% penetration in five years.
Keller, Texas, the initial market for FiOS video, has seen 21% penetration after four months, Toben noted. Verizon has launched video service in New York and Massachusetts, and will offer the service in California in the first quarter.
"It's off to a strong start," she said.
Verizon continues to take a community-by-community approach in obtaining permission to offer video service, Chief Executive Ivan Seidenberg said.
"There's traction in several states," he said. "There's a lot of momentum building, but we're taking it step by step."
He noted there have been breakthroughs in some states, and he is hoping for the political environment to change as a result of the positive reaction to Verizon's video service and the prospects of increased competition.
The company also posted a loss of 426,000 retail access lines. The decline was gentler than the loss of 463,000 lines from a year ago, and 523,000 lines in the third quarter, which Toben attributes to increased strength in broadband and bundled packages.
Verizon's new Verizon Business unit, which was formed following the acquisition of MCI Inc., should yield cost reductions of $550 million this year, $825 million in 2007, and $1.1 billion in 2008, Toben said.
Transition costs are expected to come in at $400 million in 2006, $325 million in 2007 and $275 million in 2008, she added.
Verizon is also looking to cut 7,000 jobs in the next three years as it eliminates duplicative staff, Toben said.
Toben said she sees 2006 as the peak spending year for Verizon.
On the prospect of acquiring Vodafone's stake in Verizon Wireless, Seidenberg said he would be interested in increasing Verizon's ownership of the wireless carrier in either stages or in an outright acquisition.
"If there is an opportunity, we would be ready to work with them," he said.
Seidenberg added, however, that he has not heard from Vodafone.
Recently, Vodafone's 10 largest shareholders began pressuring the company to sell its 45% stake in Verizon Wireless. Executives from Vodafone haven't ruled out a sale, but didn't commit to anything either.
-By Roger Cheng, Dow Jones Newswires; 201-938-2020; roger.cheng@dowjones.com
(END) Dow Jones Newswires"
Posted to the site on 26th January 2006
Posted to: www.cellular-news.com/story/15804.php