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Verizon Reports A Profit

Posted on: Thursday, 30 January 2003, 06:00 CST

Source: Newsbytes

Verizon Communications Inc. showed signs yesterday that it is weathering the telecommunications industry's current turmoil better than many of its peers when it posted a fourth-quarter profit of $2.3 billion (83 cents per share), compared with its fourth-quarter loss of $2.04 billion (75 cents) in 2001.

The region's largest phone company swung to a profit as other large telecommunications companies, including SBC Communications Inc., BellSouth Corp. and AT&T Corp., posted results that fell short of what had been anticipated by industry analysts.

"They have the nicest house in a bad neighborhood," said Richard G. Klugman, a telecommunications analyst with Jefferies & Co.

Verizon's revenue was up just 1.2 percent, to $17.21 billion, for the three months ending Dec. 31. For the year, the company earned $4.08 billion ($1.49) on revenue of $67.63 billion. It earned $389 million on revenue of $67.19 billion in 2001.

In general, Verizon showed healthy growth in its long-distance and wireless phone operations, but the company said it continues to lose local customers as rising competition eats into its core business.

Verizon made up for the losses partly through widespread cost cutting, including a 10 percent reduction in its workforce. The number of Verizon employees fell from 178,000 at the beginning of 2002 to 160,000 in December.

Shares of Verizon jumped 4.4 percent yesterday, or $1.60, to close at $37.65, rising on the company's modestly optimistic outlook for the coming year. The last three months marked a "very solid end to a challenging year and good momentum as we head into 2003," Doreen A. Toben, chief financial officer, said in a conference call.

Verizon is the dominant provider of local phone service from Maine to Virginia, and its Verizon Wireless unit is the nation's largest mobile-phone company. Verizon is the nation's third-largest long-distance company.

Verizon Wireless added almost 1 million wireless subscribers in the last three months of 2002, bringing its subscriber base up to 32.5 million.

Quarterly revenue from wireless customers jumped 16.3 percent, to $5.17 billion, over the year-earlier period. Annual revenue increased 10.7 percent to $19.26 billion. Verizon Wireless owns 55 percent of the business in a joint venture with Britain's Vodafone Group PLC.

Verizon executives project revenue to be stable this year and perhaps climb as much as 2 percent. Even a modest increase would be an improvement over projections offered by other companies, which Klugman characterized as "indicating there is no end to the problems -- just a downward spiral."

Local phone providers, such as Verizon, continue to lose customers in their core business. The companies put much of the blame for their customer losses on federal regulations that allow competitors to lease lines and then resell them at discount rates. But there also are more fundamental industry changes underway as millions of Americans increasingly rely on wireless phones.

AT&T, the nation's largest long-distance company, is also suffering from the growth of the wireless industry, which now includes inexpensive long-distance calling plans as a standard service feature. Toben noted that the average Verizon subscriber spends 6 hours and 40 minutes a month on a wireless phone, a 38 percent increase over 2001.

Chief executive Ivan G. Seidenberg said Verizon had abandoned plans to spin off the wireless business into a separately traded stock. The sale was planned to raise cash so Verizon could make good on its obligation to pay more than $8 billion for rights to use public airwaves it won at a government auction in 2001. However, a Supreme Court decision this week effectively nullified those auction results, freeing Verizon from its obligation.

Reported By TechNews.com, http://www.TechNews.com

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