Verizon Communications Posts Strong Results For Fourth Quarter and 2000

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  • 540,000 DSL (digital subscriber line) customers vs. 500,000 target
  • 1.4 million New York long-distance customers vs. 1 million target
  • 1.2 million net new U.S. wireless customers in quarter, 27.5 million total
  • Data revenues grow 30 percent for the year
  • 108.8 million access line equivalents (ALEs), with data circuits as measured in ALEs growing 60 percent
  • Telecom package sales increase 71 percent year-over-year
  • Proportionate international wireless customers grow 47 percent to 8.1 million

NEW YORK -- Verizon Communications Inc. (NYSE:VZ) announced today that fourth quarter 2000 reported earnings of 70 cents per diluted share, on net income of $1.9 billion, increased 11.1 percent from 63 cents, or $1.7 billion, in fourth quarter 1999. For 2000, reported earnings per share (EPS) were $4.31, or $11.8 billion, a 45.1 percent increase from $2.97, or $8.3 billion, in 1999. Reported results for all periods incorporate the net after-tax effect of gains, charges and other adjustments described below.

Adjusted EPS for fourth quarter 2000 of 77 cents, or $2.1 billion, increased 2.7 percent from 75 cents, or $2.1 billion, in fourth quarter 1999. For the year, adjusted EPS rose 2.5 percent to $2.91, or $8.0 billion, from $2.84, or $7.9 billion, in 1999, in line with the company's previously announced financial targets. Adjusted results for fourth quarter 1999 include results of the U.S. wireless properties of Vodafone Group Plc that became part of Verizon Wireless as of April 2000.

Continuing strong demand for high-growth services such as wireless and data, and solid volumes for voice services, drove a 6.7 percent increase in adjusted consolidated revenues from current operations, to $16.9 billion, from $15.8 billion in fourth quarter 1999. Full-year adjusted consolidated revenues from current operations grew 7.2 percent, to $63.4 billion from $59.2 billion in 1999. Adjusted revenues in all periods exclude revenues from certain significant operations sold in 1999 and 2000.

"Our solid operating performance in 2000 confirms both the validity of our business model and our ability to execute on it," said Verizon Chairman and Co-CEO Charles R. Lee.

"Last year, we completed two major transactions that gave us the scale as well as the financial strength and flexibility to deliver sustained, profitable growth in competitive markets. We integrated organizations without missing a beat and made full use of our new capabilities. We started a long-distance operation in New York that established a new model for simplicity and value and won more than 20 percent of the consumer market; we worked through numerous industry-wide challenges to begin meeting the tremendous demand for broadband services; we formed Verizon Wireless and became the U.S. wireless industry leader; and we did all this while maintaining both service quality and the level of growth in our telecom business. In 2001, we will build on these successes and further expand into the high-growth markets of the future," Lee said.

Verizon President and Co-CEO Ivan Seidenberg said, "As our results indicate, our investments in new services are starting to deliver significant revenue growth. We plan to further expand our market opportunities by working through the long-distance approval process this year in Massachusetts, Pennsylvania and New Jersey -- which together represent a $14 billion-a-year market in voice long-distance alone -- and we'll continue to make the investments that unlock the full potential of our networks to serve a data-centric world.

"Verizon is distinguished from its peers by its experience and its success with competition. Verizon and its predecessor companies accelerated top-line growth every year for the past few years while operating in the most competitive wireline and wireless markets in the country. We're well positioned in 2001 to further transform our growth profile and move into our target ranges of 8-10 percent revenue growth and $3.13- $3.17 earnings per share," Seidenberg said.

Revenue, Expense, Capital

Nearly 40 percent of Verizon's adjusted consolidated revenues for both the fourth quarter and the year were generated from high-growth data, wireless, long-distance, DSL and international services. In the fourth quarter, revenues from these services totaled approximately $6.6 billion, and for the year totaled more than $23.6 billion.

Total adjusted U.S. Telecom revenues grew 3.3 percent for the quarter, to $10.9 billion, while Telecom provided competitors with nearly 3.5 million switched wholesale lines and 804,000 unbundled loops at the end of the year, double the number of lines and three times the number of loops in service at the end of 1999. For the year, Telecom revenues grew 3.9 percent to $43.3 billion. Regulatory rate reductions totaled $200 million in the fourth quarter and $850 million for the year (up sharply from $500 million in 1999).

Verizon's consolidated adjusted expenses for the quarter and the year increased 8.4 percent over the respective prior-year periods, due primarily to investment in high-growth wireless, data and long-distance services.

Adjusted fourth quarter expenses for U.S. Telecom rose 4.9 percent over fourth quarter 1999, with cash expenses up 3.6 percent. The company's largest business continued to exercise strong expense control: excluding costs associated with the DSL and long-distance businesses, Telecom's quarterly expenses increased only 2.5 percent, with cash expenses growing less than 1 percent. For the year, adjusted Telecom expenses rose 4.4 percent, with cash expenses increasing 3.6 percent; excluding DSL and long-distance costs, full-year expenses grew only 2.5 percent, and cash expenses grew 1.4 percent.

Verizon also achieved approximately $535 million in annual merger-related expense savings in 2000, making substantial progress toward its target of saving $2 billion a year in expenses by the end of 2003 through synergies resulting from the Bell Atlantic-GTE merger and the formation of Verizon Wireless. These savings were realized through various means, including the re-negotiation and termination of contracts, the integration of information systems, the integration of call centers and operator service centers, and the use of best practices to improve processes.

The company's capital expenditures for the year were $17.6 billion, with almost 50 percent invested in data and wireless infrastructure.

Highlights of Operations


  • Verizon added 190,000 DSL lines in the fourth quarter, 46 percent more than in the third quarter. The 540,000 lines in service at the end of the year represent an increase of more than 500 percent over the number in service at the end of 1999.
  • Verizon Online, the company's Internet service provider, ended the year with approximately 847,000 subscribers, a 21 percent increase since the end of 1999.
  • Verizon equipped approximately 500 central offices for DSL in 2000 and ended the year with approximately 1,850 equipped offices, 30 percent more than a year ago. An average of 60 percent of the access lines in those offices qualify for DSL, making the service available to 45 percent of Verizon's access lines and households, nearly 29 million and 14 million respectively.
  • During the quarter, the company completed the acquisition of OnePoint Communications Corp. and launched Verizon Avenue, which provides bundled voice, data and video services to residents of multi-dwelling unit buildings in high-growth, densely populated urban and suburban markets around the country.


  • Verizon ended 2000 with data circuits in service equivalent to 45.9 million voice-grade lines, 60 percent more than at the end of 1999. Combined with 62.9 million voice-grade lines, Verizon ended the year with 108.8 million total access line equivalents in service, 20 percent more than at the end of 1999 (comparisons adjusted for access line sales in 2000).
  • Demand for digital high-capacity facilities and services remained strong through the fourth quarter. Verizon installed more than 2 million inter-office fiber links in 2000, ten times the number installed in 1999. The number of frame relay circuits, cell relay circuits and Primary Rate Interface ISDN (Integrated Services Digital Network) lines in service grew 47.9 percent, 80.5 percent, and 35 percent respectively since the end of 1999.
  • Fourth-quarter revenues for data services, including high-capacity, high-speed local transport services, continued their strong growth over prior periods, with full-year revenues growing 30 percent over 1999.

Long Distance:

  • Verizon's long-distance unit continued its strong growth and ended the year with 4.9 million customers nationwide, 44 percent more than a year ago, making Verizon the nation's fourth-largest provider of long-distance services. During the quarter, Verizon signed up an additional 240,000 new subscribers in New York, and the company ended the year with approximately 1.4 million New York subscribers, including some 78,000 businesses, that use Verizon Long Distance on 1.7 million lines. Verizon now serves more than 20 percent of New York's residence long-distance customers, with average revenue per consumer customer in line with industry averages, and more than 12 percent of the business market.
  • Of the 240,000 customers added in the quarter, almost 95,000 came back to Verizon from other carriers for their intraLATA toll calling, increasing the total number of "win-back" customers to 326,800, almost 41 percent more than at the end of the third quarter. As of the end of the year, 97 percent of Verizon's New York long distance customers purchase local, intraLATA toll and long-distance usage from Verizon.
  • In addition, the number of Verizon-wide customers purchasing vertical services such as Caller ID and Home Voice Mail in packages, often with basic service, grew 71 percent over fourth quarter 1999. Revenues from service packages totaled nearly $740 million for the year. On Jan. 8, 2001, Verizon introduced The Big Deal, a group of packages that in New York bundle long-distance service at 8 cents a minute with a variety of basic and value-added services.
  • On Jan. 16, 2001,Verizon re-submitted its filing for federal approval to offer long-distance service in Massachusetts, where Verizon serves 4.7 million access lines and the long-distance market is a $2 billion-plus annual opportunity. The Federal Communications Commission's decision is due by mid-April. Verizon has also filed with the Pennsylvania Public Utility Commission to begin its 100-day review of the company's proposed long-distance application to the FCC. The PUC will use the 100-day period to review the evidence that Verizon has opened its network to competitors and determine whether to support the company's application to the FCC, which Verizon then plans to file.

Verizon Wireless:

  • Verizon Wireless added 1.2 million net new customers during the fourth quarter, 5.9 percent more net additions than in fourth quarter 1999, with the total number of customers growing 15.6 percent year-over-year to 27.5 million. Penetration of covered POPs increased to 13.5 percent from 11.7 percent a year ago. The penetration gain in 2000 of 1.8 percentage points represents an increase from the 1.6 point gain in 1999.
  • More than 99 percent of fourth-quarter net customer additions were contract customers, up from 62 percent in fourth quarter 1999. Driving the strong growth in contract customers were the company's national and regional Single Rate calling plans. Also contributing to this increase was New Every Two, the industry's first handset upgrade plan, aimed at increasing loyalty and keeping customers current with the latest technology.
  • More than half of Verizon Wireless customers now subscribe to CDMA (Code Division Multiple Access) digital services, and generate more than 80 percent of the company's busy-hour usage, compared to 65 percent at mid-year. More than 750,000 customers subscribe to the company's data services, including Mobile Web Internet access, up more than 50 percent from 500,000 at the end of the third quarter.
  • Wireless revenues for the quarter grew to $4.1 billion, up 16.7 percent from fourth quarter 1999, with average monthly service revenue per subscriber increasing 3 percent. For the year, revenues grew 19.3 percent to $14.2 billion.
  • Quarterly operating income rose 35 percent to $405 million, with operating cash flow increasing 13.3 percent to $1.2 billion. For the year, operating income rose 25.5 percent, to $1.8 billion, and operating cash flow grew 14.9 percent to $4.7 billion. Operating cash flow margin was 32.4 percent for the quarter and 35.6 percent for the year.
  • During the quarter, Verizon Wireless agreed to acquire Price Communications Wireless, a wholly owned subsidiary of Price Communications [NYSE: PR], for $1.5 billion in Verizon Wireless stock and $500 million in net debt. The transaction is conditioned upon completion of the Verizon Wireless initial public offering. The deal will significantly expand the company's footprint in the Southeastern U.S. and add some 500,000 customers.
  • Verizon Wireless was the winning bidder for 113 licenses in the FCC's recently concluded auction of 1.9 GHz spectrum. The company added capacity for growth and advanced services in markets including New York, Boston, Los Angeles, Chicago, Philadelphia, Washington, D.C., Seattle and San Francisco, for a total price of approximately $8.8 billion. Verizon Wireless now has spectrum in all 50 of the top 50 Metropolitan Service Areas in the United States.

Information Services:

  • Operating income from Verizon's directory publishing and electronic commerce operations for the year rose 2 percent to $2 billion. Strong cost control and merger-related synergies limited expense increases to less than 1 percent over 1999. Revenues totaled $4.1 billion for the year, a 1.4 percent increase over 1999, with revenues from, Verizon's Internet directory service, growing 75 percent.


  • Revenues from consolidated international operations grew 19.2 percent over fourth quarter 1999 to $540 million, with proportionate international revenues exceeding $1.5 billion. For the year, consolidated revenues of $2 billion grew 15.3 percent over 1999, with proportionate revenues reaching $6.1 billion.
  • International revenue growth was driven primarily by continued worldwide demand for wireless services. The number of proportionate international wireless customers served by Verizon investments increased 2.6 million to more than 8.1 million, a 46.6 percent increase over fourth quarter 1999. A number of Verizon's wireless investments reached major customer milestones, as Taiwan Cellular exceeded 5 million subscribers and EuroTel Praha reached 2 million, and Omnitel Pronto Italia in Italy closed in on the 15-million mark.

Reported Results:

Reported net income for fourth quarter 2000 of $1.9 billion, or 70 cents per share, reflects the net after-tax effect of charges which, after offsetting adjustments, totaled $198 million, or 7 cents per share. These include a net gain on the sale of wireless properties for regulatory reasons which partially offset charges for transition costs related to the Bell Atlantic-GTE merger and other special items, including Verizon's share of certain restructuring charges at two international equity investments, and the write-off of its investment in NorthPoint Communications Corp. as a result of the deterioration in NorthPoint's business, operations and financial condition.

Reported fourth-quarter 1999 net income of $1.7 billion, or 63 cents per share, reflects net after-tax effects of charges which, after offsetting adjustments, totaled $342 million, or 12 cents per share. These include Bell Atlantic-NYNEX merger charges, net losses of Genuity (which was separated from Verizon in 2000 through an initial public offering), and a mark-to-market accounting adjustment related to notes issued by Bell Atlantic in 1999 that are exchangeable into shares of NTL Inc. and Cable & Wireless plc. This adjustment is a non-cash gain or loss, subject to limitations, depending on the share prices of NTL and Cable & Wireless. These charges were partially offset by gains including gains from asset sales.

Reported net income for 2000 of $11.8 billion, or $4.31 per share, reflects the net after-tax effect of gains, charges and other adjustments totaling approximately $3.8 billion, or $1.40 per share. The gains, which total approximately $6.3 billion, or $2.32 per share, include net gains on wireline and wireless asset sales, mark-to-market accounting adjustments related to the exchangeable notes, non-cash gains resulting from the acquisition of the assets of Cable & Wireless Communications by NTL Inc. and Cable & Wireless plc; and conforming accounting adjustments. Offsetting charges, which total approximately $2.5 billion after taxes, or 92 cents per share, include charges for merger and transition costs related to the Bell Atlantic-NYNEX and Bell Atlantic-GTE mergers, Genuity net losses and other items.

Reported net income for 1999 of $8.3 billion, or $2.97 per share, reflect the net after-tax effect of gains, charges and other adjustments totaling $365 million, or 13 cents per share, for special items including gains from asset sales, mark-to-market accounting adjustments, Genuity net losses, merger transition charges and other adjustments.

NOTE: This press release contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The following important factors could affect future results and could cause those results to differ materially from those expressed in the forward-looking statements: materially adverse changes in economic conditions in the markets served by us or by companies in which we have substantial investments; material changes in available technology; the final outcome of federal, state, and local regulatory initiatives and proceedings, including arbitration proceedings, and judicial review of those initiatives and proceedings, pertaining to, among other matters, the terms of interconnection, access charges, universal service, and unbundled network element and resale rates; the extent, timing, success, and overall effects of competition from others in the local telephone and intraLATA toll service markets; the timing and profitability of our entry into the in-region long-distance market; our ability to combine former Bell Atlantic and GTE operations, satisfy regulatory conditions and obtain revenue enhancements and cost savings; the profitability of our entry into the nationwide broadband access market; the ability of Verizon Wireless to combine operations and obtain revenue enhancements and cost savings; our ability to convert our ownership interest in Genuity Inc. into a controlling interest consistent with regulatory conditions, and Genuity's ensuing profitability; and changes in our accounting assumptions that may be required by regulatory agencies, including the SEC, or that result from changes in the accounting rules or their application, which could result in an impact on earnings.


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