Verizon Reports Strong Cash Flow in Q3

Verizon Communications reported continued strong cash flow in the third quarter 2010, driven by wireless, FiOS and strategic business services. Verizon's total operating revenues were $26.5 billion in third-quarter 2010, a decrease of 2.9 percent compared with third-quarter 2009. Last year's results included revenues from operations that have since been divested.


"Verizon built on a strong second quarter with a stronger third quarter, resulting in improved earnings performance and substantial cash flow," said Chairman and CEO Ivan Seidenberg. "We are building momentum and are on track to achieve our goal of growing earnings in the second half of the year. We are excited by the opportunities we see to expand wireline margins and the growth we see related to the upcoming launch of next-generation wireless services."


Some highlights from the quarter:


Wireless


* Verizon Wireless added 584,000 retail postpaid and 447,000 total retail customers in the quarter, excluding acquisitions and adjustments.


* At the end of the third quarter, the company had 86.7 million retail customers, which represented 93 percent of the company's wireless customers, the largest number of retail customers of any U.S. wireless provider.

* The company also added 550,000 reseller customers in the third quarter.


* The total number of customers at the end of the quarter was 93.2 million.


* In addition, the company had 7.9 million other connections at the end of the quarter -- such as machine-to-machine and telematics -- adding 251,000 net other connections in the quarter. This brings the number of total wireless connections to 101.1 million at the end of the third quarter.


* Retail postpaid churn remained low at 1.07 percent. Retail and total customer churn levels were 1.43 percent and 1.36 percent, respectively.


* Retail service revenues in the quarter totaled $13.5 billion, up 5.0 percent year over year. Retail data revenues were $4.8 billion, up 22.8 percent. Service revenues in the third quarter were $14.2 billion, up 7.7 percent. Total revenues were $16.3 billion, up 6.0 percent year over year.


* Retail service ARPU (average monthly service revenue per user) grew 1.8 percent over third-quarter 2009, to $51.99. Retail data ARPU increased to $18.61, up 19.0 percent year over year.


* Wireless operating income margin was 29.9 percent, an increase of 220 basis points year over year. Segment EBITDA margin on service revenues (non-GAAP) was 47.2 percent, up 150 basis points over third-quarter 2009.


Wireline

* Verizon added 226,000 net new FiOS Internet customers and 204,000 net new FiOS TV customers, sequential improvements of approximately 17 percent and 19 percent, respectively, compared with second-quarter 2010. This is the largest net quarterly increase in FiOS customers in more than a year. By the end of the third quarter, Verizon had 3.9 million FiOS Internet and 3.3 million FiOS TV customers.


* FiOS Internet penetration (customers as a percentage of potential customers) was 31.0 percent by the end of the quarter, with the product available for sale to 12.5 million premises. This compares with 28.7 percent and 10.9 million, respectively, at the end of third-quarter 2009.


* FiOS TV penetration was 27.2 percent by the end of the quarter, with the product available for sale to 12.1 million premises. This compares with 25.1 percent and 10.4 million, respectively, at the end of third-quarter 2009.


* In more mature FiOS markets, penetration rates have been consistently growing and are more than 35 percent, with a few markets in excess of 40 percent. FiOS revenues, including FiOS Digital Voice, grew 29.2 percent year over year. FiOS revenues generated approximately 50 percent of consumer wireline revenues in third-quarter 2010, compared with approximately 40 percent in third-quarter 2009.


* Total wireline broadband and video revenues -- including FiOS Internet, FiOS TV and HSI (DSL-based high-speed Internet) -- were $1.8 billion in the quarter, up 20.8 percent from third-quarter 2009.


* Consumer revenues grew 1.1 percent compared with third-quarter 2009. Consumer ARPU for wireline services was $86.55 in third-quarter 2010, up 10.9 percent compared with third-quarter 2009. ARPU for FiOS customers was more than $146.


* Global enterprise revenues totaled $3.9 billion in the quarter. This is a decrease of 0.8 percent compared with third-quarter 2009, primarily due to foreign currency effects. Sales of strategic enterprise services -- such as security and IT solutions, as well as strategic networking -- increased 6.9 percent compared with third-quarter 2009 and now represent approximately 43 percent of global enterprise revenues.
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