Monday, November 17, 2008

Economy Didn't Slow Verizon's FiOS

America may be headed for a recession, but you couldn't tell from Verizon Communications' third-quarter results. The company added wireless users in the period and saw customers spending freely on pricey Internet services.
The company's investment in FiOS, its answer to competition from cable service providers that offer bundled communication packages, appeared to being paying off. During the quarter, Verizon Communications added 233,000 FiOS television customers and 225,000 Internet subscribers. The product uses fiber-optic network technology to offer accelerated Internet service and high-definition television.
Verizon's stock gained $2.75, or 11.0%, to $27.83, during Monday's afternoon trading session.
So far so good, but Verizon still might face headwinds from a decelerating economy. U.S. consumers have scaled back discretionary spending, and if the economy weakens could look for ways to cut their monthly bills. Some households have discontinued traditioanl landline services in favor of wireless.
Indeed, traditional phone line accounts fell in Verizon's third quarter, down 12.0% from the prior year. But the company's wireless segment, a joint venture with Vodafone Group, beat analysts' new-subscriber estimates with 1.5 million sign-ups. That was particularly impressive in light of AT&T's report that it added 2.0 million subscribers in the third quarter, despite its exclusive deal to market Apple's iPhone. There had been fears that AT&T would steal market share from Verizon, thanks to the Apple device.
Verizon's third-quarter earnings rose 31.5%, to $1.7 billion, or 59 cents share, from $1.3 billion, or 44 cents a share, in last year's comparable period. Operating earnings were 66 cents a share, meeting analysts' estimates. Sales climbed 4.0% during the quarter, to $24.75 billion, and narrowly beat the consensus $24.52 billion sales forecast.
Although investors have worried that Verizon might choose to scuttle its acquisition of Alltel because of the difficult credit market, Chief Executive Ivan Seidenberg said the company stands by the deal . The acquisition would make Verizon the largest wireless network in the world.

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