Wireless sales surge lifts Verizon profit 5-fold

Earnings per share rise to 64 cents, from 12 cents

July 28, 2004|By BLOOMBERG NEWS

NEW YORK - Verizon Communications Inc., the largest U.S. provider of phone services, said yesterday that its second-quarter profit rose more than fivefold as a surge in wireless sales drove its biggest revenue gain since 2001.

Net income rose to $1.8 billion, or 64 cents a share, from $338 million, or 12 cents, in the second quarter last year, when costs for an asset sale hurt earnings.

Sales rose 6 percent in the quarter to $17.8 billion, compared with $16.8 billion a year ago, the company said.

Analysts had expected a profit of 60 cents a share and sales of $17.4 billion.

Verizon has been offering bundled packages that include wireless at discounted prices to attract and keep clients as the company loses local phone lines. Wireless sales rose 25 percent.

Verizon sells local service in 29 states and the District of Columbia.

The company's sales will increase at least 4 percent in the second half, from the first six months of last year, Chief Financial Officer Doreen A. Toben predicted in a conference call.

Sales grew 5 percent in the first half of this year, and profit in the second half will rise from the first, she said, without giving a specific forecast.

Verizon's wireless sales rose to $6.85 billion in the quarter. That helped the company post a second straight quarterly sales gain after nine periods of stagnant revenue.

Verizon Wireless is the largest U.S. mobile-phone operator.

Verizon Communications owns 55 percent of the business and Vodafone Group PLC of Great Britain owns 45 percent. Verizon Wireless, which makes up more than a third of Verizon's total revenue, added 1.53 million customers in the quarter.

"They're growing so much more than we expected," Toben said in an interview. As a result, Verizon will spend about $5.5 billion of this year's $12 billion to $13 billion capital spending budget on wireless, she said. The company had forecast spending of as little as $5 billion.

Verizon lost 2.41 million local lines since the second quarter in 2003 as clients cut off second lines and relied more on mobile phones and computer-based calling. Verizon lost 674,000 lines in the second quarter alone. The company has 70.4 million customers and about 95 million wireless and wired lines.

Verizon's shares rose $1.36, or 3.7 percent, to close at $37.86, while Vodafone's U.S. shares rose 39 cents to $21.38. Both are traded on the New York Stock Exchange.

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