Verizon: Wireless Boosts Profits, Landline Opps Include MDUs

Verizon Communications Inc. aims to capitalize on the FCC’s recent ban on telecom exclusivity contracts in apartment and condo buildings, called multidwelling units or MDUs.

CFO Doreen Toben said today the company will target MDU residents, as well others, if it is granted the video franchise it’s seeking in New York City. Verizon filed for franchise permission last week in response to a city-solicited bid, although its fiber lines already pass 20 percent of the metro area. If officials approve the proposal, Verizon said its FiOS TV would be available in all five boroughs – or 3.1 million households – within six years. The deal would last for 12 years.

Indeed, Verizon continues offsetting traditional landline losses with FiOS TV and Internet growth, as well as enterprise demand for Verizon Business enterprise services. FiOS and Verizon Business both fall into Verizon’s wireline division. Wireless and data, of course, remain Verizon’s crown jewels. Verizon Wireless boosted its parent company’s profits 10 percent in the first quarter. All told, Verizon netted $1.64 billion in income in the three months ending March 31, up from $1.5 billion during the first quarter of 2007.

More than 8 percent of consumers hung up on Verizon’s local phone product in the first quarter of 2008, Verizon reported today as part of its quarterly earnings conference call. Verizon’s landline subscribership fell to 40.52 million from 44.15 million in the year-ago period.

But the New York-headquartered company isn’t lamenting the churn. In fact, it’s steering away from landline business – selling its local lines in New England, for instance – to focus on more in-demand wireline products like FiOS for consumers and Verizon Business services for enterprises.

Verizon added 263,000 net new FiOS TV customers and 262,000 net new FiOS Internet users in the first quarter of 2008, for totals of 1.2 million and 1.8 million respectively. Verizon averages $129 per month per FiOS user, Toben said. Average revenue per user from triple-play subscribers “is even higher,” she said.

Toben said price increases “on certain bundles and products,” which she declined to specify, will come late this quarter or early in the third. There’s also bad news for workers. Verizon, which cut 6,500 landline jobs in 2007, will lay off more employees in 2008, Toben said.

Meanwhile, Verizon Business, the former MCI, increased sales .4 percent in the first quarter to reach $5.2 billion compared to the same time last year. The division did lose a couple of large customers that provided “good margins,” Toben said. Nonetheless, said Denny Strigl, Verizon’s president and COO, Verizon Business is reaping the benefits as enterprises outsource and consolidate services with one vendor. It’s doing especially well with sales of security, private IP and managed LAN/WAN services, Strigl said.

“We’re feeling good about our competitive strengths,” he told analysts.

Even as wireline progressed, the wireless side did even better. Verizon Wireless sales topped $11.6 billion in the first quarter, a 13 percent jump from a year earlier. The driver? Data. The company’s network carried more than 58 billion text messages, 1.1 billion picture/video messages and 34.6 million music and video downloads. Toben said executives expect to maintain double-digit growth.

That’s because data demand will boom, and because Verizon won the C Block 700MHz spectrum auctioned off by the FCC. Verizon increased its nationwide spectrum coverage by 60 percent, Toben said, and that should translate to more wireless subscribers.

Verizon also expects more consumers to sign up for its $99 unlimited voice plan. Major carriers in February started wireless price wars as competition for customers increases. Strigl said he’s pleased with the first-quarter results of Verizon Wireless’ unlimited offering. Before the all-you-can-talk plan launched, only 4 percent of subscribers opted for $99 or higher contracts, he said. That number now is nearly 90 percent, Strigl said.

Finally, Verizon, like its competitors, will, at some point, transition to 4G protocols. The EVDO carrier will switch to the Long-Term Evolution (LTE) standard, as AT&T is doing, but for now, that initiative isn’t a major part of the capital budget, Toben told analysts.

Verizon’s stocks fared well on its earnings news. Shares were up 55 cents, or 1.48 percent, $37.59 during late morning trading on the New York Stock Exchange.