Verizon to Take $3 Billion Charge, Maintains 2003 Guidance

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Verizon Communications (VZ), the largest U.S. local telephone company, on Tuesday said it would take about $3.0 billion in charges for a change in accounting in its telephone directory unit and the planned sale of its stake in a Mexican wireless carrier.

The New York-based company said its 2003 guidance for revenue growth and earnings, excluding one-time items, remains unchanged.

Wall Street analysts downplayed the news of the charges since the company's outlook remained unchanged.

Verizon, like its sister Baby Bells (search), said it had changed its accounting methods for its telephone book unit to recognize revenues and expenses over the life of a directory, which is usually 12 months.

The change will allow quarterly earnings to be more evenly distributed throughout the year. Previously, revenues were recognized in the quarter in which a directory was distributed.

The accounting change will result in an after-tax, non-cash charge to earnings of about $1.6 billion, or 59 cents a share, retroactive to Jan. 1, Verizon said.

The company will also take a second-quarter charge of $900 million, or 33 cents a share, as it writes down the value of its investment in Grupo Iusacell (search), Mexico's No. 3 wireless telephone company. Verizon is selling its Iusacell stake to Movil Access, which is owned by Mexican tycoon Ricardo Salinas.

Verizon will also take a second-quarter charge of $400 million to $500 million, or 14 cents to 19 cents a share, related to severance, early repayment of debt, and a write-down of some long-lived assets due to consolidation and integration of facilities.

Verizon previously said it expects 2003 revenues to be flat to up 2 percent over 2002, with earnings of $2.70 to $2.80 a share before special items.