Strong gains help Verizon beat analyst forecasts

NEW YORK — Verizon Communications Inc. earned $1.79 billion in the third quarter as strong gains in wireless and long distance helped offset mounting losses in the local telephone business.

Executives insisted that the company’s focus on local-long distance packages is helping stabilize the wireline business, but rejected the suggestion that it needs to join the industry fray in cutting prices for cellular and high-speed Internet service.

"The issue for us on pricing is not to set the bar so low that we take value out of the industry," said Verizon CEO Ivan Seidenberg. "What we’d rather do is try to maintain as much profitability as we can on the wireline side and make up this whole difference by a faster acceleration of cost reduction."

To that end, Seidenberg said that about 12,000 of Verizon’s 221,000 union and management employees are expected to accept a voluntary retirement offer.

The third-quarter profit, amounting to 64 cents a share, was down sharply from the profit of $4.41 billion, or $1.60 a share, in the same period last year, when Verizon recorded one-time gains and tax benefits from sales of businesses.

Analysts surveyed by Thomson First Call, who lowered their forecasts after a profit warning by Verizon in September, had expected a per-share profit of about 63 cents for the just-ended quarter.

The nation’s biggest local and wireless phone company, which has its regional headquarters in Everett, said revenues totaled $17.16 billion in the latest quarter. That was up slightly from $17.11 billion in the year-ago period, a tally that included about $100 million in sales from the businesses that were sold.

Driving the revenue improvement was an increase of 1.4 million customers for Verizon Wireless, bringing its market-leading total to 36 million.

The cell phone business, a joint venture with Britain’s Vodafone PLC that is 60 percent owned by Verizon, accounted for more than a third of the company’s revenues. The quarterly total of $5.94 billion marked an 18 percent increase from the wireless unit’s revenues of $5.03 billion a year earlier.

The company also noted that 100,000 of those customers have signed up for the "Push to Talk" walkie-talkie service introduced during the quarter to compete with the hugely popular feature, which was previously only available through Nextel.

Revenues from long-distance calling, where the customer base grew 1.3 million to a total of 15.9 million subscribers, increased 17.2 percent to $1.00 billion compared with third quarter of 2002.

However, revenues from local phone service declined 6 percent to $4.83 billion as Verizon lost another 479,000 customers to rivals such as AT&T who are entitled to lease Verizon’s lines under controversial federal rules designed to fuel competition. There are now 5.38 million customers who buy their local phone service from another company using Verizon’s lines.

Combined revenues from all wireline services fell 4 percent to $9.85 billion compared with third quarter 2002.

In terms of high-speed DSL Internet service, an area where Verizon has struggled to overcome a late start, the company posted a gain of 185,000 customers for a total of 2.1 million broadband lines. But total revenues for Internet and data services slipped 1.6 percent to $1.78 billion. The company said increased demand for broadband services was offset by a lessened demand for lower-speed dial-up service.

The company claimed success in containing the loss of local customers with multiservice bundles, noting that 44 percent of Verizon’s residential customers now purchase local phone services in combination with either long-distance, DSL or both.

Copyright ©2003 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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