Verizon profits slide on one-time charges

Verizon Communications reported net income of $400 million in the first quarter of 2010, down from $1.6 billion in the first quarter of 2009, but the difference was due to a number of one-time charges.

Verizon on Thursday reported revenue of $26.9 billion for the first quarter, up 1.2% from a year earlier. That growth rate is higher than in the previous two quarters, noted John Killian, Verizon's senior vice president and chief financial officer.

The company pointed to growth in its wireless and Fios broadband and television businesses as highlights for the quarter. "We saw good customer growth in wireless and Fios, and we may be seeing some positive early signs of recovery in the business market," Killian said during a conference call.

One-time charges, totaling nearly $1.2 billion, included reduced tax benefits related to retiree health care; software and other expenses related to a spinoff of some wireline assets; pension settlements; and merger integration costs related to the acquisition of Alltel in January 2009.

Earnings per share were $0.14, or $0.56 excluding one-time items. That met the expectations of analysts polled by Thomson Reuters.

Verizon officials trumpeted their wireless numbers for the quarter. Verizon Wireless added 1.5 million customers for the quarter, and the company now has 92.8 million customers, an increase of 7.2% from the first quarter of 2009.

Verizon's wireless business reported revenue of $15.8 billion for the quarter, up 4.4% from the first quarter of 2009. Wireless net income was $4.6 billion, up 6.6% from a year ago.

"I think the wireless team did a great job this quarter," Killian said. "Looking ahead, you can expect us to continue achieving both growth and profitability." Verizon will focus on gaining market share in the postpaid retail market and in the smartphone market, he said.

Verizon's traditional wireline business lost money, as is the trend for traditional telephone service among large carriers. Verizon's wireline business reported net income of $172 million for the quarter, down 75.1% from a year ago, but revenue was down just 2.9%, at $11.2 billion.

Verizon's Fios broadband and television services pumped up the wireline numbers. The company added 185,000 Fios broadband and 168,000 Fios TV customers during the quarter.

Wireline broadband and video revenue, including Fios revenue, were $1.7 billion in the quarter, up 22% from first-quarter 2009.

Verizon seems to be dealing well with a continued weak economy in the U.S., said Jeff Kagan, an independent telecom analyst.

"Verizon is in line with expectations," Kagan said in an e-mail. "However, the numbers did not show as much growth as was predicted. Subscriber growth numbers were up, but not as high as was expected."

Rapid growth in wireless may be slowing, Kagan added. "Bottom line, the telecom marketplace continues to look strong and growing, but not as robust as in the last several years," he added. "Some of that is because of the economy and some of that is because of a maturing marketplace."

Copyright © 2010 IDG Communications, Inc.

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