Verizon Communications Reports Solid Results For Fourth Quarter, Provides Outlook for 2002
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- 59 percent increase in long-distance customers year-over-year, with approximately 40 percent of the customer base coming from New York, Massachusetts and Pennsylvania.
- 122 percent increase in DSL (digital subscriber line) customers while improving customer service.
- 21.2 percent increase in data transport revenues; total data revenues exceed $7 billion.
- Continued industry-leading cost control, with the Domestic Telecom unit showing a year-over-year decline in expenses, including three consecutive quarters of cash expense reductions.
- Technology deployment that enabled the launch of the nation's first major next-generation, 1XRTT wireless network and expanded the company's DSL reach to central offices serving 79 percent of access lines.
- 22.8 percent year-over-year increase in proportionate international wireless customers, including a 1.8 million increase year-over-year, to 9.6 million total.
- Year-end totals: 29.4 million domestic wireless customers, 7.4 million long-distance customers, 1.2 million DSL customers; $17.4 billion in capital expenditures.
- EPS (earnings per share) target of $3.20 to $3.30; comparable revenue growth of 3 to 5 percent; capital expenditures of $15 to $16 billion.
NEW YORK -- Verizon Communications Inc. (NYSE:VZ) today announced adjusted diluted earnings per share of 77 cents for the fourth quarter 2001 and $3.00 for the full year on increased sales in long distance, DSL and wireless, and continued industry-leading cost cutting.
The company's adjusted net income for 2001 was $8.2 billion, compared to $8.0 billion for 2000. Fourth-quarter adjusted net income was $2.1 billion, essentially flat compared to the fourth quarter 2000. The adjusted net income for the fourth quarter and year-end 2001 include the previously announced impact related to the Sept. 11 terrorist attacks. The impact in the fourth quarter was 3 cents per share, and 6 cents per share for the full year.
Consolidated adjusted revenues grew 5.9 percent for the year, to $67.2 billion in 2001 from $63.4 billion in 2000. Revenues for 2000 did not include revenues from Vodafone properties prior to their contribution to Verizon Wireless in April 2000; adjusting for those revenues, the 2001 revenue increase was 4.1 percent. In the fourth quarter 2001, revenues grew 1.0 percent to $17.0 billion from $16.9 billion in the year-earlier quarter.
Consolidated adjusted expenses increased 1.8 percent and cash expenses decreased by 0.3 percent compared to the fourth quarter 2000. For the third consecutive quarter, Verizon's largest business unit, Domestic Telecom, decreased its adjusted cash expenses over the prior-year period. In the fourth quarter, the unit's adjusted cash expenses were down 4.6 percent to $6.0 billion from $6.3 billion in the fourth quarter 2000, and the unit's total operating expenses were down 2.3 percent to $8.4 billion from $8.6 billion.
Verizon ended 2001 with a headcount of approximately 247,000, a reduction of more than 16,000 from year-end 2000 that was accomplished largely through attrition and a fourth-quarter voluntary program. Domestic Telecom expense-control initiatives, such as reductions in overtime expenses and in the use of contractors, produced an additional equivalent headcount reduction of 13,000.
The company's 2001 capital expenditures totaled $17.4 billion, compared to $17.6 billion in 2000.
"In Verizon's first full year of operation, we have repeatedly demonstrated the strength of the GTE and Bell Atlantic merger," said Verizon Chairman and Co-CEO Charles R. Lee. "We achieved solid results for the quarter and for the year despite the continuing downturn in the economy. Synergies have enabled us to continuously reduce expenses, while our combined assets have given us a more diverse geographic base and product line. With Verizon's great businesses, the company is well-positioned for profitable growth in the years ahead."
Verizon President and Co-CEO Ivan Seidenberg said, "Verizon's focus is on operational execution. In 2001, we moved early and aggressively to head off the effects of the economy with cost-reduction efforts. At the same time, we had the management discipline and skilled workforce to respond effectively to Sept. 11, remain focused on operational metrics, and accelerate our merger integration and transition efforts. The solid foundation we built in 2001 will lead to continued quality growth and continued customer-service improvements in 2002."
Reported results incorporate the net after-tax effect of gains and charges. For the fourth quarter 2001, Verizon reported a consolidated loss of $2.0 billion, or 75 cents per diluted share, compared to net income of $1.9 billion, or 70 cents per share, in the fourth quarter 2000.
Results for the fourth quarter 2001 include charges totaling $4.1 billion, or $1.52 per diluted share. These charges relate to a variety of items, including severance costs for the reduction of approximately 10,000 employees, primarily through the fourth-quarter voluntary program; charges reflecting the current market values of investments, including Genuity; a restructuring of CTI, the company's wireless affiliate in Argentina, as a result of recent economic events in that country; charges for the sales or exit of non-strategic businesses and other asset impairments; and merger transition costs.
Reported net income for year-end 2001 was $0.4 billion, or 14 cents per diluted share, compared to $11.8 billion, or $4.31 per share, for 2000.
Reported operating revenues rose 0.8 percent in the fourth quarter 2001, to $17.0 billion, compared to the fourth quarter 2000. For the year, reported operating revenues rose 3.8 percent, to $67.2 billion in 2001 from $64.7 billion in 2000.
Verizon today also issued the following financial and operational guidance for 2002.
- EPS: $3.20 to $3.30
- Revenue growth: 3 to 5 percent
- EBITDA (earnings before interest, taxes, depreciation and amortization) growth: 7 to 9 percent
- Capital expenditures: $15 to $16 billion
- Long-distance customers: 10 million plus
- DSL customers: 1.8 to 2 million
Fourth Quarter and 2001 Operational Highlights
- Verizon Long Distance, the nation's fourth largest long-distance provider, ended 2001 with 7.4 million customers in 40 states, an increase of 2.7 million during the year, or 59 percent.
- Approximately 40 percent of the long-distance customer base comes from three states where the service has been most recently introduced. There are nearly 2.3 million customers in New York, 600,000 in Massachusetts and nearly 250,000 in Pennsylvania.
- Verizon now has more than 30 percent consumer in-franchise market share in New York and in the former GTE states, and more than 20 percent consumer in-franchise market share in Massachusetts. Sales results for Pennsylvania, where Verizon began marketing long-distance services in late October 2001, are in line with the early success rates in other Verizon states.
- On Jan. 4, 2002, the Department of Justice (DOJ) recommended that the Federal Communications Commission (FCC) approve Verizon's long-distance application in Rhode Island. In New Jersey, the state's Board of Public Utilities gave its support to Verizon's long-distance application on Jan. 9, and the DOJ recommended FCC approval on Jan. 28. On Jan. 17, Verizon filed with the FCC to provide long-distance service in Vermont.
DSL, Data and Telecom:
- In 2001, Verizon increased the number of DSL customers by 660,000, to 1.2 million, a 122 percent increase from 2000. Verizon added 225,000 customers in the fourth quarter.
- Verizon has deployed DSL to central offices serving 79 percent of the company's access lines. Operational improvements have reduced DSL installation intervals from 15 to 8 days.
- Data Services revenues grew to more than $1.8 billion for the quarter, driven by 14 percent fourth-quarter growth of Data Transport Services over 2000 and 21.2 percent growth for the year. Total annual revenues for Data Services exceeded $7 billion.
- Access line equivalents grew 13 percent in the quarter and totaled 132.1 million by year-end. Data circuits account for more than half of that total.
- Sales of packages of domestic wireline telecommunications services -- combining Caller ID, voice mail and other features -- increased 47 percent year-over-year.
- As previously announced, Verizon Wireless ended 2001 with 29.4 million customers, growing its total number of customers nearly 10 percent year-over-year. When fully allocating in the prior year previously announced subscriber-base adjustments, the growth rate would be nearly 12 percent. During the fourth quarter, the company added 715,000 net new customers.
- The company maintained its strong focus on the quality and profitability of its subscriber base. Nearly 94 percent of Verizon Wireless' total base is made up of contract customers, most of which are retail.
- Verizon Wireless continued to lead the industry in profitability and low cost structure. Operating cash flow margin improved to a strong 35 percent for the quarter and 38 percent for the year. Cash-expense-per-subscriber decreased more than 6 percent for the quarter and 1 percent for the year, due in part to a decrease in roaming costs.
- Average monthly total churn was 2.5 percent for the year and 2.7 percent for the quarter, while post-paid retail churn was 2.1 percent for both the quarter and the year. These industry-leading customer loyalty levels are due in part to the company's Worry Free Guaranteesm introduced early in 2001.
- Verizon Wireless has the most digital customers, and the most total customers, of any U.S. wireless carrier. The company ended the fourth quarter with 22 million digital customers, or 75 percent of its subscriber base.
- Service revenues for the quarter grew 8.1 percent to $4.0 billion, with total revenues up 8.8 percent to $4.4 billion. For the year, on a comparable basis including Vodafone property revenues in the first quarter 2000, service revenues grew 14.1 percent to $16.0 billion, with total revenues up 13.2 percent to $17.4 billion. Service-revenue-per-subscriber decreased by $1, to $46 in the fourth quarter, due to lower roaming revenues. For the full year, service-revenue-per-subscriber increased by more than 1 percent to $48.
- Quarterly operating income rose 10.6 percent to $448 million, and operating cash flow increased 15.3 percent to $1.4 billion. For the year, on a comparable basis, operating income grew 28.3 percent to $2.3 billion, with operating cash flow up 16.3 percent to $6.0 billion.
- Verizon Wireless continued to invest to preserve and expand its premier network. In 2001, the company handled a 41 percent increase in total traffic while achieving dramatic improvement in key network-quality metrics.
- Earlier this week, the company launched the nation's first major next-generation wireless network. With more than 20 percent of the Verizon Wireless network already converted to 1XRTT technology, the company's Express Network is now available to customers in East and West Coast markets -- including New York, Boston, Washington and San Francisco -- as well as in Salt Lake City.
- Revenues from Verizon's directory publishing and electronic commerce operations were $1.4 billion in the fourth quarter, an increase of 6.6 percent from fourth quarter 2000. The increase was due to strong operational growth, shifts in directory publication dates and increased revenues from international operations. Revenues for 2001 of $4.3 billion grew 4.1 percent over 2000. Revenues from SuperPages.com, Verizon's Internet directory service, grew 87.1 percent over fourth quarter 2000 and 71.9 percent for the year, as Verizon Information Services carried out its strategy to bundle print and online services.
- Operating income increased to $804 million, up 18.8 percent, in the fourth quarter 2001 compared to the fourth quarter 2000. The year-over-year increase was $229 million, or 11.2 percent. These increases include expense reductions as a result of cost-containment initiatives and merger synergies.
- The number of proportionate international wireless customers served by Verizon investments increased by 1.8 million to 9.6 million, a 22.8 percent increase over 2000. During 2001, Omnitel passed the 17 million subscriber mark, Eurotel Praha passed 3 million subscribers, Stet Hellas passed 2 million subscribers and Eurotel Bratislava reached more than 900,000 subscribers.
- Revenues from consolidated international operations grew $75 million, or 13.9 percent, over fourth quarter 2000 to $615 million. For the year, consolidated revenues of $2.3 billion grew $361 million, or 18.3 percent, compared to the prior year. Total proportionate revenues were $1.5 billion in the fourth quarter 2001, bringing full year 2001 proportionate revenues to $5.9 billion, an increase of $400 million or 7.3 percent compared to 2000.
- Fourth quarter 2001 operating income of $78 million brought full year 2001 operating income to $293 million, an increase of 11.8 percent compared to the prior year. Operating cash flow of $196 million in the fourth quarter 2001 brought the full year operating cash flow to $715 million, an increase of 15.9 percent compared to 2000. Equity income from international investments increased $65 million over fourth quarter 2000 to $234 million. For the year, equity income was $919 million, an increase of $247 million over 2000.
- During the year, Verizon Global Solutions Inc. established high-speed connectivity among leading commercial centers around the world, deploying a core set of global voice and data product offerings. Global Solutions Inc. switched more than 1 billion minutes in 2001 and has agreements with more than 80 different global carriers.
- On Jan. 25, 2002, Verizon Communications exercised its option to purchase an additional 12 percent of Telecomunicaciones de Puerto Rico, Inc. (TELPRI) common stock from the government of Puerto Rico, for a purchase price of $138 million. TELPRI is the holding company of the Puerto Rico Telephone Company and Verizon Wireless de Puerto Rico, Inc. Verizon obtained the option as part of the March 1999 TELPRI privatization. Verizon now holds 52 percent of TELPRI stock, up from 40 percent.
NOTE: The financial tables associated with this news release can be found on Verizon's Investor Web site.
Verizon Communications (NYSE:VZ) is one of the world's leading providers of communications services. Verizon companies are the largest providers of wireline and wireless communications in the United States, with 132.1 million access line equivalents and 29.4 million wireless customers. Verizon is also the largest directory publisher in the world. A Fortune 10 company with more than $67 billion in annual revenues and approximately 247,000 employees, Verizon's global presence extends to more than 40 countries in the Americas, Europe, Asia and the Pacific. For more information on Verizon, visit www.verizon.com.
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: the duration and extent of the current economic downturn; 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; an adverse change in the ratings afforded our debt securities by nationally accredited ratings organizations; 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, and unbundled network element and resale rates; the extent, timing, success, and overall effects of competition from others in the local telephone and toll service markets; the timing and profitability of our entry and expansion in the national long-distance market; our ability to satisfy regulatory merger conditions and obtain combined company revenue enhancements and cost savings; the profitability of our broadband operations; the ability of Verizon Wireless to achieve revenue enhancements and cost savings, and obtain sufficient spectrum resources; the continuing financial needs of Genuity Inc., our ability to convert our ownership interest in Genuity into a controlling interest consistent with regulatory conditions, and Genuity's ensuing profitability; our ability to recover insurance proceeds relating to equipment losses and other adverse financial impacts resulting from the terrorist attacks on Sept. 11, 2001; and changes in our accounting assumptions that regulatory agencies, including the SEC, may require or that result from changes in the accounting rules or their application, which could result in an impact on earnings.