Verizon, Profit Down on Layoffs, Looks to LTE Launch
Verizon had a Q2 loss of $198 million versus a profit of $1.48 billion a year earlier, mostly due to a $2.3 billion charge for job cuts. The company continues to look at tiered data pricing options as it moves to LTE, Chief Financial Officer John Killian said on a conference call Friday. Verizon’s headcount is down by nearly 25,000, to 210,000 at the end of the quarter.
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Verizon Wireless added 665,000 net postpaid subscribers in the quarter, bringing its total customer count to 92.1 million vs. 87.7 million a year earlier. Wireless revenue rose 3.4 percent year-over-year, helped by strong demand for data. The company added nearly 900,000 prepaid subscribers. It’s on track to start the LTE network by the end of the year, Killian said. Verizon Wireless continues to look at options of tiered data pricing, he said. The strategy is focused on continuing to take advantage of the rapidly growing smartphone device category, Killian said. The approach is to support different operating systems and platforms and to offer a robust device line-up, he said. Bernstein Research analyst Craig Moffett warned that the pool of post-paid subscribers is “drying up” for both Verizon Wireless and AT&T.
"Our cost-reduction efforts are gaining momentum, and trends in the global business market are showing signs of stabilization,” said Verizon CEO Ivan Seidenberg. On Verizon’s business unit, Killian said he remains cautiously optimistic on a meaningful economic recovery, noting that usage volume and the employment level remains low. He expects second-half earnings to rise 5 percent to 10 percent from the first half. The company will look at additional work-force reductions in other areas of the business on top of the 11,000 employee buyouts planned for this year, he said.
On the wireline side, Killian expects margins to improve as the company continues to cut costs and jobs. Wireline operations continued their descent, with total lines falling 9.2 percent and revenue of $11.1 billion down 3.3 percent from a year earlier. But it added 174,000 FiOS TV customers and 196,000 FiOS Internet customers, offsetting continued declines in its DSL business. Verizon called a halt to its FiOS expansion earlier this year and is now focusing on completing the buildout in existing markets (CD March 31 p4). That halt is reflected in the company’s capital expenditures. It spent $2.3 billion on wireline and $1.8 billion on wireless in Q2 2009 while the numbers are reversed this year, with more investment going to wireless.