10-QPeriod: Q1 FY2008

VERIZON COMMUNICATIONS INC Quarterly Report for Q1 Ended Mar 31, 2008

Filed April 29, 2008For Securities:VZ

Summary

Verizon Communications Inc. (VZ) reported solid financial results for the first quarter ended March 31, 2008. The company demonstrated consistent revenue growth, driven primarily by its Domestic Wireless segment, which saw a significant increase in service and equipment revenues. This growth was attributed to a rising customer base and increased average revenue per user, particularly from data services. The Wireline segment experienced a slight revenue decline, largely due to ongoing decreases in traditional voice services, though this was partially offset by growth in broadband and strategic services. The company continued its strategic investments in areas like FiOS broadband and video services, aiming for market share gains and long-term profitability. Overall, Verizon maintained profitability, with operating income and income before taxes showing positive year-over-year growth, supported by operational efficiencies and strategic focus on high-growth markets.

Key Highlights

  • 1Consolidated revenues increased by 5.5% to $23.8 billion, primarily driven by a 13.2% increase in Domestic Wireless revenues.
  • 2Domestic Wireless added approximately 1.5 million net retail customers, bringing the total to 65.2 million, with average retail service revenue per customer per month increasing by 1.3%.
  • 3Wireline revenues decreased by 1.4% to $12.3 billion, impacted by declines in traditional voice services, but broadband connections grew by 14.9% year-over-year.
  • 4Operating income rose 14.1% to $4.3 billion, with the Domestic Wireless segment showing a strong 19.3% increase in operating income.
  • 5The company completed the spin-off of its local exchange and related business assets in Maine, New Hampshire, and Vermont, reducing its net debt by approximately $1.4 billion.
  • 6Verizon Wireless was a successful bidder in the 700 MHz spectrum auction, with an aggregate bid price of $9.4 billion, with payments largely made in April 2008.
  • 7The company's cash and cash equivalents significantly increased to $5.5 billion from $1.2 billion at the end of the prior year.

Frequently Asked Questions

Verizon's Domestic Wireless segment showed strong growth, with revenues increasing by 13.2% year-over-year to $11.7 billion. This was driven by an increase in customers and average revenue per user, particularly from data services. In contrast, the Wireline segment saw a slight revenue decline of 1.4% to $12.3 billion, primarily due to ongoing decreases in traditional voice services, although broadband and strategic services provided some offset.

The most significant event was the completion of the spin-off of Verizon's local exchange and related business assets in Maine, New Hampshire, and Vermont to FairPoint Communications. This transaction reduced Verizon's net debt by approximately $1.4 billion. Additionally, Verizon Wireless was a successful bidder in the FCC's 700 MHz spectrum auction, agreeing to pay $9.4 billion for licenses.

Verizon demonstrated improved profitability. Consolidated operating income increased by 14.1% to $4.3 billion, and income before taxes, discontinued operations, and extraordinary item rose by 9.4% to $2.6 billion. The effective income tax rate decreased slightly to 36.5% from 37.3% in the prior year's quarter.

Verizon experienced a significant increase in its cash position, with cash and cash equivalents growing from $1.2 billion at the end of 2007 to $5.5 billion by March 31, 2008. Net cash provided by operating activities increased by 6.9% to $5.4 billion. The company used capital for investments, including $4.2 billion in capital expenditures and $0.9 billion for the FCC spectrum auction deposit. Significant financing activities included issuing $4 billion in notes and repurchasing $1 billion of its common stock.