On Monday, Verizon Communications reported a 30 percent drop in third-quarter earnings. The company's losses stem from slow subscriber growth and costs associated with the Alltel acquisition earlier this year.
"Verizon still has a lot of expenses from the Alltel merger. They've got the expenses from having duplicate managing structures that they are going to carry for a while until they can do a reorganization," said Mike Disabato, a senior analyst with the Burton Group. "But that will work itself out. The company is not in any great danger."
Verizon earned $1.18 billion, or 41 cents per share, in the third quarter. That compares to $1.67 billion, or 59 cents per share, in the year-ago period. Revenue climbed 10 percent to $27.3 billion, representing a spike from integrating Alltel's wireless operations.
Verizon has 89 million wireless subscribers, a year-over-year increase of 25.7 percent, adding 1.2 million net accounts. The wireless division saw a 24.4 percent increase in total revenues, a 1.13 percent retail churn and a 48.1 percent increase in data revenues.
Focusing on Long-Term Value
"Verizon continues to generate strong cash flow, which we have used in building the foundation for sustainable, long-term shareowner value," said Verizon CEO Ivan Seidenberg. "Even through the worst of the recession, we have continued to raise our dividend and to add new customers, expand markets and grow revenues based on the power and innovation of Verizon's wireless, broadband and global networks."
As Seidenberg sees it, the Verizon network is now an engine for next-generation communications services that will create new short- and long-term opportunities for the company. "As the U.S. economic and employment picture improves, and as we accelerate reductions in our own cost structure, we are well-positioned to quickly and significantly improve our growth profile," he said.
Seidenberg also noted that a simplified organizational structure announced earlier this month will make way for Verizon to improve productivity levels. The realignment has combined two former Wireline business groups, Verizon Telecom and Verizon Business, into one organization.
Verizon Wireless marked a significant milestone in its LTE network-deployment plans in August with the successful completion of the first LTE 4G test data calls over its 700MHz spectrum in Boston and Seattle.
As part of the earnings announcement, Verizon Wireless and Google announced a strategic partnership that will leverage the Verizon Wireless network and the best of the Android open platform to deliver mobile applications, services and devices. Verizon Wireless expects to launch two Android-based devices before the end of the year.
The company continued to roll out new devices, including the HTC Touch Pro2, a 3G global smartphone; the Samsung Rogue, with a full-touch display, QWERTY keyboard and one-touch access to popular social-networking widgets; and the Nokia 7705 Twist, featuring a unique, swivel-open square shape.
"We crossed the line a couple of years ago with the number of mobile phones in this country being larger than the number of wired lines," Disabato said. "We're [not] going backwards. If Verizon has lost a little bit on their mobile service because of this acquisition, they'll recover that and go forward."