What was the impact of the MCI acquisition on Verizon's financial results?

The acquisition of MCI, completed on January 6, 2006, significantly impacted Verizon's financial results, primarily driving a substantial increase in consolidated revenues, particularly within the Wireline segment. For the third quarter of 2006, Wireline revenues increased by 35.5% compared to the prior year, and for the nine months ended September 30, 2006, the increase was 34.7%. This integration also contributed to increased operating expenses and capital expenditures as Verizon worked to combine operations and realize synergies.

How is Verizon's wireless business performing, and what are the key growth drivers?

Verizon's Domestic Wireless segment demonstrated strong performance, with revenues increasing by 18.2% in the third quarter and 18.3% year-to-date. Key growth drivers include continued customer acquisition, reaching 56.7 million by the end of Q3 2006, and a significant surge in data revenues, which grew by 95.3% year-over-year in the third quarter. This reflects the company's strategic focus on expanding wireless data services.

What is Verizon's strategy regarding its Information Services business?

Verizon is strategically divesting its Information Services business, which consists of U.S. print and Internet yellow pages directories. The company's Board of Directors approved a proposed spin-off of this business into a new, separate public company named Idearc Inc. This transaction is expected to occur around November 17, 2006, and is designed to allow Verizon to focus more on its core communications and wireless operations. The spin-off is also expected to reduce Verizon's debt by approximately $7 billion.

How is Verizon managing its capital expenditures and debt levels?

Verizon is directing significant capital expenditures towards growth areas like its FiOS network deployment and wireless spectrum acquisitions. Capital expenditures for the nine months ended September 30, 2006, totaled $12.3 billion, with full-year guidance of $17.0 billion to $17.4 billion. The company is also actively managing its debt, with its debt-to-equity ratio decreasing to 47.4% at the end of Q3 2006. The company has substantial unused credit facilities and is also using proceeds from divestitures to manage its debt.

VZ 10-Q Quarterly Report Q3 FY2006 — Revenue, Net Income, EPS

Summary

Verizon Communications Inc. reported strong revenue growth for the third quarter and nine months ended September 30, 2006, largely driven by the acquisition of MCI and continued performance in its Domestic Wireless segment. Total revenues increased by 25.8% for the quarter and 25.4% year-to-date. The company is strategically shifting its focus towards higher-growth areas like wireless and broadband, while managing the decline in traditional wireline voice services. The company is actively managing its capital allocation towards these growth areas and streamlining operations for efficiency. Integration of MCI is progressing as planned, with ongoing efforts to realize merger synergies. Verizon Wireless continues to expand its network and customer base, with significant growth in data revenues. The company is also pursuing strategic divestitures, including the planned spin-off of its Information Services business, to further focus on core operations.

Key Highlights

1Consolidated revenues increased by 25.8% in Q3 2006 and 25.4% for the nine months ended September 30, 2006, primarily due to the MCI acquisition and Domestic Wireless growth.
2The MCI merger, completed on January 6, 2006, is integrating well, with ongoing efforts to realize merger synergies and a focus on transforming revenue towards higher-growth markets like wireless and broadband.
3Domestic Wireless segment revenues grew 18.2% in Q3 2006 and 18.3% year-to-date, driven by customer additions (56.7 million by Q3 end) and significant growth in data revenues (up 95.3% YoY in Q3).
4Wireline segment revenues saw a substantial 35.5% increase in Q3 2006, largely attributed to the MCI acquisition and growth in broadband connections (up 45.1% YoY).
5Verizon announced the proposed spin-off of its U.S. print and Internet yellow pages directories business (Information Services) into a new public company, Idearc Inc., expected to occur around November 17, 2006.
6Capital expenditures for the nine months ended September 30, 2006, were $12.3 billion, with full-year 2006 guidance between $17.0 billion and $17.4 billion, reflecting investment in growth areas like FiOS network deployment.
7The company is actively managing its debt, with a debt-to-equity ratio of 47.4% at September 30, 2006, down from 49.1% at year-end 2005, and has approximately $6.2 billion in unused bank lines of credit.

VERIZON COMMUNICATIONS INC Quarterly Report for Q3 Ended Sep 30, 2006

Summary

Key Highlights

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