Verizon Loses $2 Billion

Verizon Communications comes out of its first full year as
a merged company with a mixed report card, expanding its next-generation services
successfully while cutting the fat from money-losing operations and dealing with the afteraffects of 9-11.

Executives at the nation’s largest incumbent local exchange carrier (ILEC),
formed through the merger
of GTE and Bell Atlantic
in mid-2000, announced fourth quarter and 2001
numbers Thursday.

Verizon lost $2 billion in the fourth quarter of 2001, the result,
officials say, of job cuts and the extensive damage caused by the events of 9-11.

Charles Lee, Verizon chairman and co-chief executive officer, pointed out
the highlights of an otherwise-gloomy quarter, mainly gains in digital subscriber line (DSL) customers, expansion of its long-distance service in the region and the continued
growth of Verizon Wireless.

“We achieved solid results for the quarter and for the year despite the
continuing downturn in the economy,” he said. “Synergies have enabled us to continuously
reduce expenses, while our combined assets have given us a more diverse geographic base and product line. With Verizon’s great businesses, the company is well-positioned for profitable growth in the years ahead.”

Officials reported Verizon experienced an increase in its DSL presence in
2001, to 1.2 million customers, and 29.4 million Verizon Wireless customers.

Continued growth in DSL and Verizon Wireless proves to executives the
staying power of next-generation services and its ability to keep the company
profitable. Incumbent telephone companies are loathe to incorporate new technologies for fear of the initial costs involved to deploy the services.

Now, Verizon (though officials have dragged their feet for years) are
embracing these technologies and look to continually expand over the coming years.

In the DSL department, officials told investors and reporters at its fourth
quarter conference call Thursday morning that it had DSL access multiplexers
(DSLAMs, which handle and separate voice and data communications for every customer) in 79 percent of its central offices (COs).

Verizon gained 225,000 DSL customers in the fourth quarter of 2001, part of
the 660,000 total customers acquired in 2001. Officials expect little growth in DSL
sales, hoping to garner another 600,000 to 800,000 more in 2002, despite operational
improvements like self-installation in eight days, which usually brings new customers to the fold.

Verizon Wireless announced
this week
the launch of its 3G service running on the CDMA2000 1XRTT
platform. While not the service many expect of the wireless digital phone technology, it’s further proof the company is willing to invest in the future, despite costs.

The division added 715,000 new customers in the fourth quarter, giving them
a total of 29.4 million wireless phone customers. Of that 29.4 million, 22 million are
digital phone customers and officials hope to upsell their 3G service to that large
customer base.

So far, the service is only available in New York, Boston, Washington, Salt
Lake City and San Francisco.

In 2002, executives hope to shore up their resources and go from
there. Ivan Seidenberg, Verizon president and co-chief executive officer, predicts further cost-cutting measures.

“In 2001, we moved early and aggressively to head off the effects of the
economy with cost-reduction efforts,” he said. “At the same time, we had the management
discipline and skilled workforce to respond effectively to Sept. 11, remain focused on
operational metrics, and accelerate our merger integration and transition efforts. The solid foundation we built in 2001 will lead to continued quality growth and continued
customer-service improvements in 2002.”

In 2002, Verizon expects revenue growth of three to five percent — not optimistic, but considering the market environment these days, not out of line with Wall Street expectations of four percent growth.

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