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Mixed message for Verizon
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January 9, 2002: 6:25 p.m. ET
Reiterates EPS target, staff cut efforts; misses target for wireless customers.
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NEW YORK (CNN/Money) - Verizon Communications reiterated its earlier guidance for fourth-quarter profit and said it would take a charge in the period for about 7,000 staff cuts in the period.
The nation's largest local phone provider did not give details on the size of the charge or charges for certain international operations and several marketable securities. It is also assessing how new accounting rules for goodwill will be treated.
Verizon's job cuts were accomplished in December through a voluntary buyout program due to a slowing economy and restructuring efforts, said company spokesman Bob Varettoni.
The plan to cut the staff was announced in November, although the statement Wednesday by co-CEO Ivan Seidenberg at an investors' conference in Scottsale, Ariz., was the first detail on the number of employees accepting buyouts. The cuts entail a bit less than 3 percent of Verizon's staff.
Verizon said it continues to expect adjusted diluted earnings per share of $3.00-to-$3.03 for 2001, excluding special items. This compares with $2.91 a share it earned in 2000. Analysts surveyed by earnings tracker First Call had an average earnings per share forecast of $3.01, with estimates ranging from $3.00-to-$3.07.
The company still expects revenue growth of 4-to-5 percent from the $64.71 billion reported a year ago.
Verizon Wireless, the joint venture between the company and British telecommunications provider Vodafone Group PLC, ended the year with 715,000 net new customers, fewer than the 752,000 it added in the third quarter. It also widely missed analysts' estimates, which ranged from 900,000 to 1.1 million net new customers.
That announcement hurt the shares of the two companies, sending Verizon (VZ: Research, Estimates) shares down 92 cents to $48.88, while the American depositary shares of Vodafone (VOD: Research, Estimates) dropped $1.70 to $23.75.
"These results add to a long list of negative data points in wireless that have emerged in recent days, further confirming widespread softness in wireless," Lehman Brothers analyst Tim Luke said in a research note.
Several smaller wireless firms recently have reported customer additions that missed or only met the low end of expectations.
Verizon Wireless said it ended the year with 29.4 million customers, 6.9 percent more than a year ago.
Customer turnover rose to 2.5 percent from 2.2 percent in the third quarter, although it still was less than the 2.6 percent recorded a year ago.
"They didn't have enough gross adds to offset the higher churn, so the net adds suffered," Guzman's Comack said. Net customer additions are calculated by subtracting customer turnover from gross customer additions.
Wireless IPO on hold
Seidenberg told the investors' conference that the joint venture is in "no rush" to move ahead with its earlier plans for an initial public offering. He cited both the weak market for IPOs as well as wireless stocks, as well as the collapse of a deal to buy wireless licenses.
"The reasons behind why we wanted to do the IPO changed," he said.
Verizon and other telephone companies bid $15.85 billion for wireless licenses almost a year ago, but that sale was thrown into chaos.
A federal appeals court said the Federal Communications Commission could not repossess and re-auction the airwaves from NextWave Telecom Inc. when that company failed to make timely payments. A deal to distribute the NextWave licenses collapsed when Congress failed to pass authorizing legislation by Dec. 31.
Due to the collapse of the NextWave deal, Verizon Wireless does not "have the pressure to raise money," Seidenberg said. Verizon is one of 13 bidders for the licenses seeking a refund of down payments.
Seidenberg said the company believes there will be an IPO for the joint venture at some point in the future, but wouldn't put a time frame on it.
"Long term, we believe a separate equity is reasonable for that business," he said. "But in light of NextWave and current valuations, we're in no rush to move forward."
Gains in long distance, DSL customers
There was some bright news announced by the company. It said it recorded about 7.4 million long-distance customers at the end of the year, 51 percent more than a year ago, and more than its target of 6.9 million. Verizon is the nation's fourth-largest long-distance telephone company.
The company's long-distance business accounts for only about 5 percent of its current total revenue but is considered to be one of its biggest growth drivers.
Verizon also ended the year with about 1.2 million high-speed Internet customers using digital subscriber lines (DSL), which met its expectations and was more than double the customers at the end of 2000.
Verizon said its 2001 earnings guidance includes its previously announced 6-cent impact related to the Sept. 11 attacks. Other special items are expected to include a charge for job cuts and a charge related to certain international operations and several marketable securities.
Verizon plans to report its full 2001 results Jan. 31.
More customers than a year ago
Verizon Communications said it expects capital expenditures for the year to be within its previously targeted range of $17 billion-to-$17.2 billion, and estimated $1.1 billion in annualized merger-related savings following its purchase of GTE and the formation of Verizon Wireless. 
-- from staff and wire reports
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