Verizon posts DSL, wireless gains; $1.79 billion profit

Verizon Communications today posted a $1.79 billion third-quarter profit, reporting record growth in wireless, DSL and long-distance customers, which were offset by mounting line losses.

Verizon’s $1.79 billion profit was down substantially from the $4.41 billion in earnings reported in the third quarter of 2003, when Verizon recorded several one-time gains and tax benefits from divestitures. Q3 Revenues totaled $17.6 billion, up slightly from the $17.11 billion posted last year. The real gains, however, were operational. Verizon added 185,000 DSL customers, its single highest quarter of DSL growth, bringing its subscriber base to 2.1 million. While pleased with the growth, Verizon plans to accelerate its broadband plans by the end of the year, bringing its total penetration to 80% of its access lines--up from the current 72%--by the end of the year, said chief financial officer Doreen Tobin at Verizon’s earnings call.

"While we’re gaining confidence in our ability to increase our DSL penetration, we are candidly not where we want to be yet," Tobin said.

Verizon Wireless added another 1.4 million retail subscribers, an overall subscriber increase of 3.8% since June, and a 12.5% increase in net adds and a 14% increase year over year. Verizon Wireless had 36 million retail and wholesale customers at the end of September. Verizon Wireless--a joint venture between Vodafone and Verizon Communications--accounted for $6 billion of Verizon’s revenues.

"Growth at Verizon Wireless is actually accelerating, growing at a rate of 18.2% in this quarter instead of 14% in the last," Tobin said.

Bundling also played a significant role in the quarter’s results. Verizon officials said 44% of its residential customers now purchase local voice services bundled with either long-distance or DSL. Verizon added 1.3 million long-distance customers giving it 15.9 million total long-distance subscribers. While long-distance subscribers far outstrip data customers, Verizon officials said it does not want to gain penetration by slashing prices on DSL.

"DSL by itself won’t necessarily be the glue that will win in the marketplace against cable," CEO Ivan Seidenberg said. "If someone in the industry has a formula that works we’ll copy it, but at this point, our view is that we’d rather maintain as much profitability as we can in the wireline side."

Those growth areas helped to offset declining revenues from line losses over the quarter, Tobin said. Verizon Wireless reported a 3.1% loss in residential lines and a 4.6 % loss in business lines, representing 479,000 total lines, most of which came from unbundled network element platform losses.