The New York Times-20080129-Cellular Unit And Internet Stand Out For Verizon
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Cellular Unit And Internet Stand Out For Verizon
Full Text (508 words)That old phone cord is tying Verizon down.
Verizon Communications said on Monday that its traditional telephone business remained a drag on the bottom line. But the company said it was not yet seeing the effect of a slowing economy, and its wireless business continued to show promising growth.
Verizon announced net income of $1.07 billion for the fourth quarter, ended Dec. 31, up from $1.03 billion in the period a year earlier, roughly in line with analysts' estimates. Its operating revenue rose 5.6 percent, to $23.8 billion. For the year, revenue was up 6.1 percent, to $93.4 billion.
The company's cellular unit, Verizon Wireless, which is a joint venture with Vodafone Group, was the brightest spot, adding two million new customers in the fourth quarter for a total of 65.7 million. The number of home broadband subscribers grew 17.9 percent in 2007 from the previous year.
The traditional telephone business was a different story. Verizon lost 10.6 percent of its residential lines in 2007. Over all, the total number of landlines, including business customers, fell to 41.4 million in 2007 from 45.1 million in 2006, a drop of 8.1 percent.
Craig Moffett, a senior telecommunications analyst at Sanford C. Bernstein & Company, wrote in a report discussing the earnings that Verizon's traditional business is showing more than a little strain. He added: If a principal appeal of Verizon's shares is their presumed resilience in the face of economic weakness, their results must be judged as mixed. Wireless is a clear positive, but weakness in the consumer wireline business cannot be easily dismissed.
Continued growth in the wireless business, of course, is the result of a continuing shift in consumer behavior as people turn to mobile phones not only to talk to friends and family, but also to listen to music, send text messages and use the Internet.
Dennis F. Strigl, Verizon's president and chief operating officer, stressed in an interview that Verizon did not plan to lower its sales projections for this month because of the slowing economy, something other communications companies have done in recent weeks. He declined to give a forecast for future months.
Instead, he said, the biggest challenge for companies like Verizon is competition from cable companies and newer entrants. I think the impact of the economy on the business is much less likely than competition, said Mr. Strigl.
To retain more residential customers, Verizon is betting on its FiOS fiber-optic network, which allows the company to offer television, phone and Internet services in a bundled package. The company has more than a million FiOS TV customers, Mr. Strigl said. Over time, he said, Verizon expects to shift more spending from its core business to FiOS.
When asked if traditional landline service would ever go away, Mr. Strigl said that its definition would be expanded to include video and data as well as voice. I think we are rapidly transforming into something other than a utility, he said.
Verizon's stock rose 0.9 percent to close at $38.11 a share after the earnings report.
