Defying the general economic trends, Verizon Communications reported growing sales of broadband, wireless and strategic business services in the fourth quarter 2008. Strong customer and revenue growth contributed to 43 cents in diluted earnings per share (EPS) in the quarter, compared with 37 cents per share in the fourth quarter 2007. On an adjusted basis (non-GAAP), fourth-quarter 2008 EPS was 61 cents, compared with 62 cents in the fourth quarter 2007. On an annual basis, Verizon reported $2.26 in 2008 EPS from continuing operations, compared with $1.90 in 2007. On an adjusted annual basis, 2008 EPS from continuing operations was $2.54, a 7.6 percent increase, compared with 2007 EPS of $2.36.
Verizon's total operating revenues grew 3.4 percent in the fourth quarter 2008, increasing to $24.6 billion from $23.8 billion in the fourth quarter 2007. After adjusting for the spinoff of non-strategic local exchange and related Wireline business assets early in 2008 (non-GAAP), this represents an increase of 4.6 percent.
"Verizon has shown that it is able to compete effectively in this economic environment," said Chairman and CEO Ivan Seidenberg. "We grew profits and maintained strong cash flows throughout 2008. In the fourth quarter, we continued to produce top-line growth, fueled by strong sales volumes for broadband, wireless and strategic business services."
Some highlights:
Wireless
- 1.4 million organic (non-acquisition-related) net customer additions, almost all retail; 1.2 million total net customer additions, including a net customer loss under a previously announced exchange agreement related to the 3Q 2008 acquisition of Rural Cellular.
- 72.1 million total customers; 70.0 million retail customers, up 9.9 percent, not including customers added with the Jan. 9, 2009, acquisition of Alltel.
- 12.3 percent increase in total revenues; data revenues up 41.4 percent; ARPU growth for 11th consecutive quarter; strong 47.2 percent EBITDA margin on service revenues (non-GAAP).
- Verizon Wireless continued to have low churn -- 1.35 percent churn among all customers, and 1.05 percent among the company's retail post-paid customers.
- Verizon Wireless continued its double-digit revenue growth, with total quarterly revenues of $12.8 billion, up 12.3 percent year over year. Full-year revenues were $49.3 billion, up 12.4 percent. Service revenues in the fourth quarter were $11.1 billion, up 12.0 percent year over year, and $42.6 billion for the full year, up 12.2 percent.
- Revenue growth was driven by accretion in ARPU (average monthly revenue per customer), which increased year over year for the 11th consecutive quarter. Total service ARPU of $51.72 was up 1.4 percent year over year, reflecting strong growth in total data ARPU, which was up 27.9 percent over the same period.
- Wireless operating income margin reached 29.7 percent, up 350 basis points on a year- over-year basis. EBITDA (earnings before interest, taxes, depreciation and amortization) margin on service revenues reached 47.2 percent.
Wireline
- Wireline total operating revenues were $11.9 billion. Verizon Telecom, which serves domestic consumer and small-business customers, and Verizon Business, which serves large-business and government customers worldwide, each had 2.3 percent year-over-year quarterly revenue declines. At Verizon Telecom, this was the smallest decrease in 12 quarters. Wireline total operating expenses were $11.2 billion, a 1.3 percent increase compared with the fourth quarter 2007.
- Broadband and TV products now account for more than 31 percent of consumer ARPU in legacy markets, compared with 22.7 percent in the fourth quarter 2007. The ARPU among FiOS customers continues to grow and is more than $133 per month.
- Verizon added 303,000 net new FiOS TV customers, compared with 226,000 in the fourth quarter 2007. The company had 1.9 million FiOS TV customers at year-end 2008, adding nearly 1 million FiOS TV customers since year-end 2007.
- FiOS TV sales penetration (sales as a percentage of potential customers) increased to 20.8 percent, compared with 16.0 percent in the fourth quarter 2007. FiOS TV service was available for sale to 9.2 million premises by year-end 2008. This represented a 57 percent increase in the availability of FiOS TV -- and, by extension, of "triple play" bundles of FiOS TV, Internet and voice services -- since year-end 2007.
- Verizon added 282,000 net new FiOS Internet customers, compared with 244,000 in the fourth quarter 2007. The company had nearly 2.5 million FiOS Internet customers at year-end 2008, adding nearly 1 million FiOS Internet customers since year-end 2007.
- FiOS Internet sales penetration increased to 24.9 percent, compared with 20.7 percent in the fourth quarter 2007. FiOS Internet was available for sale to nearly 10 million premises by year-end 2008.
- Broadband and video revenues from consumer customers totaled nearly $1.2 billion in the fourth quarter 2008 -- representing year-over-year quarterly growth of 42.0 percent. Total broadband connections were 8.7 million, a net increase of 214,000 over the third quarter 2008. This includes a decrease of 68,000 DSL-based Verizon High Speed Internet connections, which was more than offset by the increase in FiOS Internet customers. The 8.7 million is an increase of 8.2 percent year over year.
- Growing revenue from broadband and video services drove consumer ARPU in legacy Verizon wireline markets (which excludes consumer markets served by the former MCI) to $68.46 for the fourth quarter 2008, a 14.3 percent increase compared with the fourth quarter 2007.
- Sales of strategic business services -- such as IP, managed services, Ethernet and optical ring services -- generated $1.5 billion in revenue in the quarter, up 8.4 percent from the fourth quarter 2007.
- Verizon Business continued to expand its global network reach and capabilities, announcing the installation of 26 Private IP (PIP) edge switches, including new nodes in Morocco and Pakistan. The company now has edge switches deployed in 59 countries and supports PIP services in more than 120 countries. Additional network enhancements included installation of eight Converged Packet Access nodes and further mesh network expansion in Asia-Pacific and North America, including the deployment of nodes in Singapore, Toronto, Montreal and several U.S. cities. In an additional seven U.S. markets, the company deployed multiplexers that enable remote provisioning and trouble isolation while providing reduced latency.
