Verizon Cuts Estimates for Second Half of the Year

Citing soft demand for business voice services, ongoing consumer landline services technology substitution, and adverse state and federal regulatory rulings, Verizon Communications cut its financial outlook for the rest of the year. Diluted earnings per share (EPS) before special items are now expected to be in the range of $2.56 to $2.60, down from earlier estimates of $2.70 to $2.80. Comparable revenue growth for the year remains in the 0% to 2% range. Verizon is reducing its planned CAPEX for 2003 to $12 billion to $12.5 billion, down from the previous guidance of $12.5 billion to $13.5 billion. Investments in wireless remain as previously targeted, with demand-driven declines in Domestic Telecom investment due to decreases in access lines and other reductions due to the sale of the company's stake in Mexican wireless carrier Grupo Iusacell and lower capital spending at subsidiaries.


Regarding the FCC's recently released Triennial Review order, Verizon contends that the FCC failed to deal directly with the UNE-p issue and resulting pricing issues. The company now expects TELRIC reform to be delayed until Summer 2004 with state proceedings to follow.


Somewhat offsetting revenue and expense pressures has been continued growth in Verizon's DSL and long distance businesses. Also offsetting the pressures are expected results from Verizon International, driven primarily by the results at Italian wireless provider Omnitel as well as asset sales. Verizon Wireless now expects a total of more than 4.5 million net retail customer additions for 2003. Previous guidance, announced two months ago, was for more than 4 million.
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