Verizon Profit Rises on Strong Cell Unit

Verizon Communications Inc. (VZ) earned $3.04 billion in the fourth quarter, posting a 6 percent revenue gain as another powerful showing by the cellular business more than compensated for the continuing decline of traditional local phone service.

The profit reported Thursday, which included about $1.2 billion in one-time gains and related tax benefits from the sale of some Canadian assets, amounted to $1.08 per share, matching most Wall Street forecasts.

In the same period in 2003, Verizon lost $1.46 billion, or 53 cents per share. That included about $2.9 billion in severance costs as 21,000 employees accepted a buyout to reduce the payroll, as well as about $200 million in environmental remediation costs.

Excluding one-time factors, Verizon earned 64 cents per share in the fourth quarter 2004, up from 58 cents per share in the fourth quarter of 2003.

Fourth-quarter revenues totaled $18.26 billion, up from $17.20 billion a year earlier.

Verizon executives declined to comment on news reports that Bell rival SBC Communications Inc. (SBC) is negotiating a possible takeover of AT&T Corp. (T), a company which despite its mounting troubles still boasts a very valuable customer base of businesses and consumers.

"We have nothing to report," Ivan Seidenberg, Verizon's chief executive, said in a conference call after the report. "You know we look at everything every day. I don't view anything I read this morning as anything out of the ordinary."

Verizon Wireless, owned in partnership with Vodafone Group PLC of Britain, contributed more than 40 percent of the company's revenues, compared with 35 percent in the final months of 2003. The unit's revenue total of $7.34 billion was up 22.7 percent from the year-ago period.

The wireless customer base grew by 1.7 million customers to finish the year at 43.8 million.

The growth was slightly below the 1.8 million-customer gain posted by Cingular Wireless, now the nation's largest cell company with its recent acquisition of AT&T Wireless. Cingular, jointly owned by Verizon rivals SBC Communications Inc. and BellSouth Corp., finished 2004 with 49.1 million subscribers.

Nevertheless, Verizon Wireless continued to outperform its larger rival on two key measures.

The rate of monthly customer losses amounted to just 1.4 percent of the subscriber base at Verizon Wireless, well below the 2.6 percent churn rate reported by Cingular earlier this week.

Average revenue per user rose to $50.32 per month at Verizon Wireless, compared with $49.22 for Cingular.

Revenues from the wireline telephone and Internet business decreased 2.4 percent to $9.7 billion in the fourth quarter 2004 cellular and Internet-based calling continued to erode the traditional residential business.

The number of phone lines in service fell by nearly 700,000 during the quarter, continuing a trend that also includes customers switching to high-speed Internet access from dial-up over a second phone line. Notably, subscribers to Verizon's DSL business grew by more than 300,000 during the quarter to a total of 3.56 million.

For all of 2004, Verizon earned $7.83 billion, or $2.79 per share. In 2003, the company earned $3.08 billion, or $1.12 per share.

But excluding one-time factors, full-year earnings fell to $2.51 per share compared with $2.60 per share in 2003.

Full-year revenues came to $71.28 billion, up 5.7 percent from $67.47 billion in 2003, Verizon's strongest annual revenue growth in three years.

Shares of Verizon fell 46 cents to $36.06 on the New York Stock Exchange (search).