Wireless Powers Verizon’s Windfall

Verizon announced strong fourth-quarter revenues and profits
today, with wireless growth more than offsetting residential line losses.

For the last three months of 2004, Verizon earned $3 billion, or $1.08 per
diluted share, compared with a loss of $1.5 billion, or 53 cents per share,
in the fourth quarter 2003.

The recent quarter’s figures include profits from the sale of the company’s
Canadian directory business, while the year-ago quarter was impacted by
early-retirement expenses and environmental remediation costs.

Before special items, earnings were 64 cents per share in the fourth quarter of
2004 and 58 cents per share in the fourth quarter 2003.

Verizon Wireless, a joint venture between Verizon and Vodafone ,
led the way, contributing more than 40 percent of Verizon’s
revenue during the quarter.

Doreen Toben, Verizon’s CFO, said the wireless group now has more than 16
million data service users, up 62 percent over last year. Toben expects that
number to continue to rise as the company expands
its third-generation services.

Customer churn at Verizon Wireless was down to 1.3 percent in the
fourth quarter, and average revenue per user was up 3 percent to $50.32, Toben

In other departments, Verizon added 306,000 DSL
customers during the fourth quarter, a number it expects to increase as a result of its partnership
with Yahoo .

It also continues to deploy fiber to the home, passing between 35,000 and
40,000 homes per week.

“We’re on plan to launch video [over fiber] in the second
half of year,” Toben said. “We’ve secured most of the content and have
developed a user interface.”

Verizon continues to lose customers in its traditional wireline business. It
lost 466,000 retail residential lines during the fourth quarter, as customers
chose to use their wireless phones as their primary line or opted for
broadband phone service.

Earnings news was overshadowed, however, by reports that SBC is in
talks to buy AT&T for about $15 billion. The acquisition
would foster more direct competition between SBC and Verizon for enterprise

Verizon CEO Ivan Seidenberg said the proposed deal is not surprising given the
wave of consolidation in the telecom industry.

“We will keep an eye on [the SBC-AT&T talks],” Seidenberg said this morning
in a conference call with analysts. “Nothing I’ve heard this morning will
change the way we focus on the enterprise market.”

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