Selasa, 29 Juli 2008

Verizon Communications second-quarter profit topped views, but sales missed estimates as shrinking demand for wireline service and disappointing sales of high-speed Internet and digital TV overshadowed solid wireless growth.

Adjusted for one-time items, the telecom giant earned 67 cents per share for the quarter that ended June 30, up 15.5% from a year earlier and 2 cents over the average estimate of analysts polled by Thomson Reuters. Sales rose 3.7% to $24.12billion, just shy of analysts forecast $24.17 billion.

Verizons (NYSE:VZ - News) broadband business slowed sharply while its fledgling TV business, called FiOS, signed up fewer customers than analysts had forecast.

Verizon downplayed the impact of a weaker U.S. economy on its wireline results in a conference call with analysts. But management cited tough competition from cable TV operators in the consumer and small business markets.

"Its very stiff competition that were receiving from cable," said Denny Strigl, Verizons chief operating officer, on the call.

"Despite some challenges, we delivered double-digit earnings growth in the quarter," Strigl added. "Although we may see some softening in (call) volumes, we do not expect any significant economic impact on our results in the second half of the year."

Verizons shares slipped more than 2% Monday to close at 33.60. The stock has fallen 22% this year.

Rival AT&T (NYSE:T - News), the nations biggest phone company, says the slowing economy has hurt its consumer business, though analysts say its service region is more exposed to the housing downturn than Verizons.

"There are concerns about the economy getting worse," said Todd Rosenbluth, an analyst at Standard & Poors. "Even though Verizon says theyre not seeing pressure, people think that they might going forward."

Verizon Wireless, partly owned by U.K.-based Vodafone (NYSE:VOD - News), added 1.5 million customers, beating the consensus estimate of 1.33 million additions. Revenue climbed 11.8% to $12.1 billion.

Sales of wireless data products, such as text messaging and music downloads, jumped 45% to $2.56billion.

"Wireless continues to sparkle," said Craig Moffett, an analyst at Bernstein Research.

Verizon Wireless aims to overtake AT&T as the biggest U.S. wireless firm. In June, Verizon agreed to buy Alltel, the fifth-biggest wireless firm, for $28.1 billion in cash and debt.

Second-quarter revenue from Verizons wireline business fell 1.8% to $12.1 billion as the company lost consumer lines at a faster pace. Verizon had 22.45 million residential lines as of June 30, down 11.4% from a year earlier and down 3.3% from the previous quarter.

Verizon added 54,000 high-speed Internet customers in the quarter, down from 281,000 a year ago and 263,000 in the first quarter.

"Theyre facing challenges in consumer wireline," said Rosenbluth. "Broadband, which has been a growth driver for all telecom (companies), has slowed. But wireless remains in sound shape and the corporate side is holding its own."

Verizon has upgraded its network with fiber-optic lines to deliver pay-TV and faster Internet services. The company has said itll spend $23 billion on the FiOS network through 2010.

For the second quarter, Verizon added 176,000 FiOS TV customers. Thats up 5% from the 167,000 customers it signed up in the same quarter last year, but down from the 263,000 it added in the first quarter and below analysts forecasts.

Bernstein Research had estimated Verizon would add 283,000 FiOS TV customers in the quarter; Bank of America forecast 260,000, and Goldman Sachs said 230,000.

"It is remarkable to see FiOS growth already slowing," Moffett said. Verizon ended a promotion in the quarter that gave new FiOS customers who signed two-year contracts a 19-inch, high-definition TV.

The firm opened a new front in its battle against cable on Monday, launching its fiber-optic TV service in New York, where Time Warner Cable (NYSE:TWC - News) and Cablevision (NYSE:CVC - News) operate. Until now, the biggest city getting FiOS TV had been Virginia Beach, Va. -- population 435,619.

FiOS TV will only be available to 10% to 15% of New York homes at launch. Verizon has said it plans to make FiOS available to the entire city by 2014.

Rosenbluth says Verizon needs to ramp up FiOS TV in other big east coast cities to stem the loss of home lines to cable TV firms.

Verizon says the FiOS project will turn EBITDA-positive (earnings before interest, taxes, depreciation and amortization) in 2008.


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