Verizon touts broadband, mobile amid flat earnings

Verizon trumpeted what it called industry record growth in both its wireless and broadband sectors, in announcing its 2005 financial results. The company added two million wireless customers and 613,000 net new broadband connections on its combined DSL-FiOS networks.

Doreen Toben, executive vice president and chief financial officer, said during the company's earnings call this morning that the bulk of the carrier's capex would continue to be pushed into these growth sectors. She also announced that Verizon will soon launch FiOS in California, after recent launches in the Northeast and it's initial launch in Keller, Tex.

Verizon's FiOS penetration rate in Keller is now 21%, very close to its five-year goal of 25%, while Verizon overall is averaging higher penetration in its FiOS markets than the company had expected. "early penetration rates indicate we are well on our way to meeting our five-year goals," Toben said. The company now has 5.1 million total broadband customers.

Toben said broadband growth, in particular, is beginning to overshadow persistent, but less severe access line losses. "The fourth quarter was the first time that broadband additions exceeded the decline in residential access lines," she said. "Our progress in growth areas makes traditional access line metrics less important than they used to be."

Despite the progress, however, overall fourth quarter earnings were flat, before non-recurring items were considered, and annual earnings were up slightly, from $7.0 billion in 2004 to $7.2 billion in 2005. When the cost of changes in management benefits, severance and relocation costs were factored in, Verizon for the fourth quarter fell to $1.7 billion or 59 cents per share, compared with $3 billion or $1.08 per share for the fourth quarter of 2004. Annual revenues were down from $7.8 billion in 2004 to $7.4 billion in 2005, once the non-recurring costs were considered.

“Verizon finished the year strongly, and as we begin 2006 our strategies are taking root,” said Ivan Seidenberg, Verizon chairman and CEO. "We continue to grow what is already a great customer base -- especially as we continue to introduce innovations in wireless and broadband services. At the same time, we are investing in our powerful networks to position Verizon for additional growth in the future. We see real momentum in these growth initiatives, and we look forward to seizing the opportunities we see in the large-business market with our new Verizon Business unit.”

Consolidated operating revenues for the fourth quarter were up 6.7% over the year-previous quarter to $19.3 billion, excluding revenues from operations Verizon soldin 2005. For the year, consolidated operating revenues were up 6.0% on the same basis, to $74.9 billion. Total operating expenses were also up, hitting $15.6 billion in the fourth quarter and $60.3 for the year, up 4.8% and 3.7% respectively over the comparable 2004 periods.

Verizon Wireless achieved record growth and profitability in the fourth quarter of 2005. For the year, the company added 7.5 million net new customers, and continued to keep churn low at 1.2 percent for the fourth quarter and 1.3 percent for the year. Among non prepaid customers, churn was 1.0 percent for the quarter and 1.1 percent for the year.

Toben called the performance "the best quarterly results for any wireless carrier ever."

Revenues for Verizon Wireless were $8.7 billion in the fourth quarter, up 18.3 percent over the previous year’s quarter, while annual reveues were $32.3 billion, up 16.8 percent over 2004.