Verizon Communications Inc. posted a 21 percent drop in profit after pension expenses mounted and business customers cut phone lines. The carrier plans to trim more than 8,000 jobs in the second half.
Second-quarter net income fell to $1.48 billion, or 52 cents a share, New York-based Verizon said today. Pension and acquisition costs amounted to 11 cents. Verizon, which trails only AT&T Inc. in total subscribers, said sales rose 11 percent to $26.9 billion, boosted by Verizon’s purchase of Alltel Corp.
Revenue from Verizon’s global enterprise business dropped 6.7 percent. U.S. employers trimmed almost half-a-million jobs in June, shrinking the pool of possible customers. Verizon, which has more than 235,000 employees, said today that it will pare the workforce in its declining wireline business, slashing expenses as the economic slump lengthens.
The enterprise business’s drop “suggests that we’re nowhere near out of the woods in this recession,” said Sanford C. Bernstein & Co. analyst Craig Moffett in New York. He expects Verizon’s shares to lag behind the rest of the market. Moffett is the only analyst surveyed by Bloomberg who advises investors to sell the stock.
Excluding some costs, profit was 63 cents a share, in line with the average estimate of analysts in a Bloomberg survey. A year ago, second-quarter net income amounted to $1.88 billion, or 66 cents.
Verizon dropped 50 cents to $31 in New York Stock Exchange composite trading at 4 p.m. The stock has declined 8.6 percent this year.
Verizon added 303,000 net new FiOS Web customers and 300,000 for television. The average monthly bill for FiOS customers topped $135, almost double that of the average consumer.
FiOS Gains
The carrier is spending $23 billion through 2010 to install fiber-optic cable, giving customers high-definition TV and faster Internet speeds than some cable operators. The service is helping Verizon challenge those rivals, which have lured away subscribers with discounted packages of Web, TV and digital- phone service.
“They do have promotions offered out there to kind of help take that initial market share away from cable,” said Christopher King, an analyst at Stifel Nicolaus & Co. in Baltimore. Those included offering new FiOS customers a free mini laptop from Compaq and $5 off their $119.99 monthly bills for a year.
Phone lines to homes and businesses declined 9.9 percent from a year earlier, to 34.3 million. The carrier has looked to FiOS and the wireless business for growth as customers cut phone lines. More than one in five American households have only wireless service, according to a National Health Interview Survey in the second half of 2008.
Wireless Voice
New wireless voice customers are becoming rarer, with nine mobile devices in circulation for every 10 people in the U.S. at the end of last year, according to the CTIA wireless industry association.
U.S. carriers have looked to Web-equipped phones that can download videos and play music to appeal to consumers. AT&T added 1.4 million customers last quarter, partly thanks to the debut of the latest generation of Apple Inc.’s iPhone.
Verizon is in talks to introduce a gaming phone and plans to roll out Palm Inc.’s Pre early next year after the smart phone’s exclusivity agreement ends with No. 3 wireless carrier Sprint Nextel Corp. Verizon added 1.1 million wireless subscribers, close to King’s estimate of 1.2 million.
To contact the reporter on this story: Amy Thomson in New York at athomson6@bloomberg.net
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Verizon Profit Drops 21%; Carrier Plans 8,000 Job Reductions
Source: Bloomberg
Date: 07/27/2009
