8-KOther Events

VERIZON COMMUNICATIONS INC 8-K Report, Corporate Update (Jan 30, 2008)

Filed January 30, 2008For Securities:VZ

Summary

Verizon Communications Inc. (VZ) filed an 8-K on January 29, 2008, reporting on its fourth quarter and full-year 2007 results and providing guidance for 2008. The company expressed confidence in achieving another year of meaningful earnings growth and improving operating income margins in 2008. A key takeaway for investors is the expected reduction in capital expenditures for 2008 compared to 2007 levels, with specific targets for both Wireline and Wireless segments indicating a slight decrease. Furthermore, Verizon outlined its strategic long-term targets over a 3-to-5-year planning period. The Wireless segment is projected to achieve double-digit annual revenue growth and maintain strong EBITDA margins between 43% and 45% on service revenues. The Wireline segment aims for continued revenue growth improvement and an expansion of EBITDA margins to the 30% to 33% range. The company also announced an update on the spinoff of its local exchange business in Northern New England, expecting a quicker closing in Q1 2008 and a slightly larger net debt reduction than initially estimated.

Key Highlights

  • 1Verizon targets another year of meaningful earnings growth and operating income margin expansion in 2008.
  • 22008 capital expenditures are projected to be lower than the $17.5 billion spent in 2007, with slight reductions expected for both Wireline and Wireless segments.
  • 3Long-term (3-5 year) targets include double-digit annual revenue growth and 43%-45% EBITDA margins for the Wireless segment on service revenues.
  • 4The Wireline segment aims for improved revenue growth and expanded EBITDA margins to 30%-33% over the planning period.
  • 5The spinoff of Verizon's local exchange business in Maine, New Hampshire, and Vermont to FairPoint Communications is expected to close in Q1 2008.
  • 6The net debt reduction from the aforementioned spinoff is estimated to be approximately $1.4 billion, $300 million higher than the original estimate.

Frequently Asked Questions

Verizon is targeting another year of meaningful earnings growth and an improvement in operating income margins for 2008. Additionally, capital expenditures are expected to be below the $17.5 billion level seen in 2007.

Over the next 3 to 5 years, Verizon Wireless is targeting double-digit annual revenue growth and EBITDA margins on service revenues between 43% and 45%. The Wireline segment expects continued revenue growth improvement and aims to expand its EBITDA margins to a range of 30% to 33%.

The spinoff of Verizon's local exchange and related business assets in Maine, New Hampshire, and Vermont to FairPoint Communications is expected to close in the first quarter of 2008. This transaction is now projected to result in a net debt reduction of approximately $1.4 billion for Verizon, which is $300 million more than initially estimated.

Verizon highlights several potential risks that could cause future results to differ materially from forward-looking statements, including adverse changes in economic and industry conditions, labor matters, natural disasters, technological disruptions, regulatory proceedings, competitive pressures, the pace of fiber-to-the-premises deployment, spectrum availability for wireless, changes in accounting assumptions, and the ability to achieve cost savings and revenue enhancements post-MCI merger.