Broadband offsets losses at Verizon

Verizon Communications reported a 4.1 per cent increase in third-quarter profits as strong wireless and DSL broadband growth offset accelerating fixed-line losses at the largest US telecommunications group.

The results reflect the shift underway at Verizon as its senior management, led by Ivan Seidenberg, focus on growth opportunities including wireless and the delivery of TV and video programming over its new Fios fibre optic network.

Mr Seidenberg said the company, which is awaiting regulatory approval for its $8.5bn purchase of MCI, would probably be less acquisitive next year. He also issued lower-than-expected capital expenditure guidelines of about $15.7bn for 2006 and said Verizon would consider share buybacks – something its peers have already announced.

Like the other large US telecoms groups, Verizon’s share price has been under pressure this year, reflecting concerns about competition from cable television companies and high levels of capital spending. Verizon’s stock has fallen 24 per cent this year – ranking it among the worst performers in the Dow.

Third-quarter net income increased to $1.87bn, or 67 cents a share, from $1.8bn, or 64 cents, a year earlier on revenues that grew by 5.6 per cent to $19bn. Looking ahead, Verizon said revenues next year were expected to increase by 5.5-5.8 per cent

Underpinning the latest results, Verizon Wireless, the company’s mobile telephony joint venture with Britain’s Vodafone, added 1.9m subscribers – a 14.3 per cent increase that brought the total number of subscribers to 49.3m, maintaining Verizon Wireless as the
second largest US mobile carrier behind Cingular Wireless.

Average monthly revenues per subscriber increased by 4.6 per cent to $51.61 boosted by strong wireless data growth and customer “churn”, a key measure of loyalty that dipped to 1.3 per cent from 1.5 per cent a year earlier.

Verizon added 389,000 DSL and Fios customers, bringing its total number of high-speed internet subscribers to 4.5m. Verizon is spending about $30bn over 15 years to build a fibre-optic network that extends into homes and businesses. Verizon is applying for licences across the country. The Fios network is due to reach 3m homes by the end of the year.