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Verizon Scraps Wireless IPO, Beats Q4 Estimates

Compared to a year ago, things are looking up -- at least, that's the claim by Verizon Communications, which Wednesday posted fourth-quarter 2002 net income of $2.3 billion or of 83 cents per share (EPS), beating analyst consensus by two pennies.

In addition, the phone giant has scrapped its planned $5-billion initial public offering of Verizon Wireless because it said it no longer sees a need for the additional funding. For the fourth quarter, Verizon accrued 964,000 in its wireless venture; 566,000 joined as long-distance users, with 148,000 inking on the dotted line for digital subscriber line (DSL) service.

But whether Verizon pulled the IPO due to its own funding needs or the lack of demand for the new issue remains a question. The company has been forced to delay the offering more than once due to volatile stock market's declines. The IPO was first proposed in August 2000.

Revenue rose 1.2 percent to $17.2 billion, and the New York-based company, which tallied a loss of $2 billion a year ago this quarter, attributed its success to quarterly revenue growth and expense reduction, as well as strong sales in wireless, long-distance, DSL and bundled product groups.

For the year, reported earnings were $4.1 billion, or $1.49 a share, including a net charge of $4.3 billion, or $1.56 a share.

Chief Executive Officer Ivan Seidenberg trumpeted great progress for 2002 despite a "very difficult economic environment."

"While conserving capital, we met customer demands through product and packaging innovations and by using advanced technology to efficiently provide more capabilities through our world-class wireline and wireless networks," Seidenberg said.

The firm said it expects 2003 revenues to be flat or a bit higher (0 to 2 percent) as soft demand and competition offset wireless sales. Specifically, the concern expects EPS of $2.70 to $2.80, capital expenditures of $12.5 to $13.5 billion and net debt of $49 to $51 billion.

Verizon and fellow Baby Bells have seen their traditional local phone businesses decline because of steadily growing competition and leaner spending by customers. Carriers also blamed the spending dearth on lost traditional lines due to the explosion of wireless phones and e-mail.

Next month, the Federal Communications Commission is expected in its Triennial Review process to weigh what to do with the Baby Bells' unbundled network element, or UNE arrangements.

UNES consist of equipment, such as the UNE-platform, which includes the phone company's local voice switch, or transmission facilities, such as local loops. Current rules state Baby Bells must make UNEs available to rivals to ensure fair competition. If these firms fail to do so, they face penalties from the FCC for failing to ensure line-sharing, which allows carriers to offer broadband services over the same residential phone line a customer uses for voice service.

Early word is that the FCC may be changing its tune and that Chairman Michael Powell is in favor of dismantling pro-competition UNEs, effectively choking off competitors such as AT&T and MCI.