10-QPeriod: Q2 FY2007

VERIZON COMMUNICATIONS INC Quarterly Report for Q2 Ended Jun 30, 2007

Filed July 31, 2007For Securities:VZ

Summary

Verizon Communications Inc. reported solid revenue growth for the first six months of 2007, primarily driven by its Domestic Wireless segment, which saw a 17% increase in revenues year-over-year. This growth was fueled by a 13.2% rise in customer base and an increase in average revenue per user (ARPU), particularly from data services. The Wireline segment, while experiencing a slight revenue decline of 0.5%, showed resilience with growth in broadband connections and enterprise business, offsetting declines in traditional voice services. Financially, the company demonstrated improved profitability, with operating income rising significantly. Significant events included the sale of Telecomunicaciones de Puerto Rico, Inc. (TELPRI) and an extraordinary loss related to the nationalization of CANTV in Venezuela. The company also continued to manage its debt effectively, reducing its total debt levels. Management remains focused on strategic imperatives like revenue growth, market share gains, profitability improvement, operational efficiency, and customer experience, signaling a continued commitment to shareholder value.

Key Highlights

  • 1Consolidated revenues increased by 6.3% for the quarter and 6.4% for the six months ended June 30, 2007, driven by strong performance in the Domestic Wireless segment.
  • 2Domestic Wireless segment revenues grew by 17.1% year-over-year for the quarter and 17.0% for the six months, attributed to a 13.2% increase in customer base and rising ARPU, especially from data services.
  • 3Wireline segment revenues saw a slight decrease of 1.1% for the quarter and 0.5% for the six months, but showed positive trends in broadband connections (up 25.5% year-over-year) and enterprise business growth.
  • 4Operating income increased by 29% for the quarter and 25.7% for the six months, with operating income margin improving to 17.8% in Q2 2007 from 14.7% in Q2 2006.
  • 5The company sold its interest in Telecomunicaciones de Puerto Rico, Inc. (TELPRI) in March 2007, resulting in a net pretax gain of $120 million.
  • 6An extraordinary loss of $131 million was recorded in Q1 2007 due to the nationalization of CANTV in Venezuela.
  • 7Total debt decreased by $3,835 million during the first six months of 2007, and the debt-to-equity ratio improved to 39.5% from 42.8% at year-end 2006.

Frequently Asked Questions

The primary driver of Verizon's revenue growth was the strong performance of its Domestic Wireless segment, which experienced a significant increase in revenues due to subscriber growth and higher average revenue per user (ARPU), particularly from data services. The Wireline segment's broadband and enterprise business also contributed positively, helping to offset declines in traditional voice services.

Verizon's profitability improved significantly. Operating income increased by 29% for the quarter and 25.7% for the six months ended June 30, 2007, compared to the prior year periods. The operating income margin also saw a substantial improvement, rising to 17.8% in the second quarter of 2007 from 14.7% in the same period of 2006.

The company completed the sale of Telecomunicaciones de Puerto Rico, Inc. (TELPRI) in March 2007, realizing a net pretax gain. However, it also recorded an extraordinary loss of $131 million in the first quarter of 2007 related to the nationalization of its investment in CANTV in Venezuela. Merger integration costs associated with the MCI acquisition were also reported.

Verizon actively managed its debt during the first six months of 2007, reducing its total debt by $3,835 million. This reduction was achieved through debt repayments and redemptions, partly funded by proceeds from divestitures. The company's debt-to-equity ratio improved, indicating a strengthening financial position.