Management’s Discussion and Analysis
of Financial Condition and Results of Operations

CONSOLIDATED RESULTS OF OPERATIONS (1 OF 4)

In this section, we discuss our overall results of operations and highlight items that are not included in our business segment results. We have two reportable segments, which we operate and manage as strategic business units and organize by products and services. Our segments are Domestic Wireless and Wireline.

This section and the following “Segment Results of Operations” section also highlight and describe those items of a non-recurring or non-operational nature separately to ensure consistency of presentation. In the following section, we review the performance of our two reportable segments. We exclude the effects of certain items that management does not consider in assessing segment performance, primarily because of their non-recurring and/or non-operational nature as discussed below and in the “Other Consolidated Results” and “Other Items” sections. We believe that this presentation will assist readers in better understanding our results of operations and trends from period to period.

On March 31, 2008, we completed the spin-off of our local exchange and related business assets in Maine, New Hampshire and Vermont. Accordingly, Wireline results from divested operations have been reclassified to Corporate and Other and reflect comparable operating results.


Consolidated Revenues

(dollars in millions)

Years Ended December 31,

2008

 

2007

 

% Change

 

2007

 

2006

 

% Change

 

Domestic Wireless

$

49,332

 

$

43,882

 

 

12.4

 

$

43,882

 

$

38,043

 

 

15.3

 

Wireline

                                   

Verizon Telecom

 

29,912

 

 

30,780

 

 

 

 

 

30,780

 

 

31,759

 

 

 

 

Verizon Business

 

21,126

 

 

21,109

 

 

 

 

 

21,109

 

 

20,546

 

 

 

 

Intrasegment eliminations

 

(2,824

)

 

(2,760

)

 

 

 

 

(2,760

)

 

(2,801

)

 

 

 

 

 

48,214

 

 

49,129

 

 

(1.9

)

 

49,129

 

 

49,504

 

 

(0.8

)

Corporate and Other

 

(192

)

 

458

 

 

nm

 

 

458

 

 

635

 

 

(27.9

)

Consolidated Revenues

$

97,354

 

$

93,469

 

 

4.2

 

$

93,469

 

$

88,182

 

 

6.0

 

*nm - not meaningful

2008 Compared to 2007

Consolidated revenues in 2008 increased by $3,885 million, or 4.2%, compared to 2007. This increase was primarily the result of continued strong growth at Domestic Wireless.

Domestic Wireless’s revenues in 2008 increased by $5,450 million, or 12.4%, compared to 2007 due to increases in service revenues and equipment and other revenue. Service revenues during 2008 increased $4,619 million, or 12.2%, compared to 2007 primarily due to increases in data revenues and customers. Equipment and other revenue increased principally as a result of increases in the number of existing customers upgrading their wireless devices. Total data revenues increased by $3,265 million, or 44.2% in 2008 compared to 2007. There were 72.1 million total Domestic Wireless customers as of December 31, 2008, an increase of 9.7% from December 31, 2007. Domestic Wireless’s retail customer base as of December 31, 2008 was approximately 70 million, a 9.9% increase from 2007, and represented approximately 97.2% of its total customer base. Service ARPU increased by 1.2% to $51.59 in 2008 compared to 2007, primarily attributable to increases in Data ARPU driven by increased use of our messaging and other data services. Retail Service ARPU increased by 0.6% to $51.88 in 2008 compared to 2007.

Wireline’s revenues in 2008 decreased $915 million, or 1.9%, compared to 2007, primarily driven by lower demand and usage of our basic local exchange and accompanying services, partially offset by continued growth from broadband and strategic services. During 2008, we added 660,000 net new broadband connections, including 956,000 net new FiOS data connections, offset by a net decline of 296,000 high speed Internet connections. As of December 31, 2008 we served 8,673,000 connections, including 2,481,000 for FiOS Internet, representing an 8.2% increase in total broadband connections from December 31, 2007. In addition, we added 975,000 net new FiOS TV customers in 2008, for a total of 1,918,000 at December 31, 2008. The revenue growth at Verizon Telecom driven by broadband and video services was more than offset by a 3,722,000 decline in subscriber access lines resulting from competition and technology substitution, including wireless and VoIP. Revenues at Verizon Business increased primarily due to higher demand for Internet-related product offerings, specifically Private IP products and the impact of foreign currency exchange rates on services billed in local currencies, partially offset by lower voice revenues.

2007 Compared to 2006

Consolidated revenues in 2007 increased by $5,287 million, or 6.0%, compared to 2006. This increase was primarily the result of continued strong growth at Domestic Wireless.

Domestic Wireless’s revenues in 2007 increased by $5,839 million, or 15.3%, compared to 2006 due to increases in service revenues and equipment and other revenue. Equipment and other revenue increased principally as a result of increases in the number of existing customers upgrading their wireless devices. Total data revenues increased by $2,911 million, or 65.0% in 2007 compared to 2006 driven by increased use of our messaging and other data services. There were approximately 65.7 million total Domestic Wireless customers as of December 31, 2007, an increase of 11.3% from December 31, 2006. Domestic Wireless’s retail customer base as of December 31, 2007 was approximately 63.7 million, a 12.2% increase from 2006, and represented approximately 97% of its total customer base. Service ARPU increased by 2.3% to $50.96 in 2007 compared to 2006, primarily attributable to increases in data revenue per customer. Retail ARPU increased by 2.2% to $51.57 in 2007 compared to 2006.

Wireline’s revenues in 2007 decreased $375 million, or 0.8%, compared to 2006, primarily driven by lower demand and usage of our basic local exchange and accompanying services, partially offset by continued growth from broadband and strategic services. During 2007, we added 1,227,000 new broadband connections, an increase of 18.1%, including 847,000 for FiOS, for a total of 8,013,000 lines at December 31, 2007. In addition, we added 736,000 FiOS TV customers in 2007, for a total of 943,000 at December 31, 2007. Revenues at Verizon Business increased during 2007 compared to 2006 primarily due to higher demand for strategic products. These increases were offset by a decline in voice revenues at Verizon Telecom due to a 3.5 million decline in subscribers resulting from competition and technology substitution, such as wireless and VoIP, including those subscribers who have migrated to our other service offerings.