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Verizon Profit Declines, Despite Strong Wireless Growth

7:30 am on May 3, 2006 | Category: Business, Corporate, Wireless

American telecom giant, Verizon Communications, has announced significant growth in wireless revenue, but a decline in net earnings, due to MCI merger costs.

The Verizon Wireless mobile phone venture, which Verizon owns in common with Vodafone Group, experienced massive growth in the first quarter, adding a total of 1.7 million subscriptions. The carrierâ€™s â€œchurnâ€ or customer cancellations reached a record low at 1.18%, representing a major victory for Verizonâ€™s wireless division.

These gains were largely offset, however, by losses in the wireline phone business, due to greater competition from cable companies.

“On the wireless side everything was strong. The churn numbers were fantastic. Not a blow-out quarter on wireline it appears,” commented Bear Stearns analyst, Michael McCormack

Verizonâ€™s overall net earnings fell to $1.63 billion, or $0.59/share, in the first quarter, compared to $1.76 billion ($0.63/share) in the same period last year. Before merger costs, earnings were down only slightly, to $0.59 per share.

Overall revenue increased to $22.74 billion, from $18.18 billion a year ago, largely due to the acquisition of competitor MCI. The company expects its profits to increase substantially once the integration of MCI is complete.

“We expected the first quarter to be the lowest with earnings ramping more in the second half of this year,” said Chief Financial Officer, Doreen Toben, in a conference call with analysts.

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