Verizon's Girth Gives It an Earnings Cushion
Big is beautiful in Verizon's (VZ) - Get Report case.
The long-distance, local and wireless telephone giant disclosed that business is slowing a bit in 2001 this week. But it's the biggest phone company around, so it can cut expenses instead of its earnings-per-share outlook. And it won't be cutting any curves out of its buildout budget in 2001 beyond the $1 billion it already lopped off when reporting its first-quarter earnings. It may think of taking another $1 billion out of next year's spending. Maybe. If things get to looking worse.
Verizon President Larry Babbio spoke with
Credit Suisse First Boston
about its revised prospects this week. Verizon's local phone business is suffering in the lousy economic climate, but the company is doing better than expected compared with its competitors, according to a
Securities and Exchange Commission
filing it made after the talk. However, DSL business is only a few shades better at Verizon than it is elsewhere in the dimming sector that features bankrupt almost-partner
NorthPoint
and limping
Covad
(COVDE)
. Verizon doesn't have to be very aggressive to outdo its opponents, but its DSL shortfalls will pinch revenues.
Credit Suisse analyst Dan Reingold cut his revenue growth predictions for Verizon by a half-point to 5.9%, based mainly on 10,000 fewer customer additions in the DSL arena than the first quarter's 180,000 new faces. It is still on target to hit its 2001 goal of 1.2 million to 1.3 million subscribers.
UBS Warburg
took its 2001 revenue growth figures down 0.3%, shaving 0.2% off first-quarter numbers.
Being the combination of
Bell Atlantic
and
GTE
, Verizon can easily make that money back by further streamlining its operations. After a May offering that reaped $3.2 billion for the company, it also can stay on track to spend $17.5 billion on data, long-distance, local and wireless networks in 2001, $4.7 billion of that on its wireless network. The market is not looking receptive to a prospective Verizon wireless-segment IPO, but why worry? A little local trouble won't keep the company from hitting 76-cent consensus estimates for its quarter ended June 2, with a whopping $17.1 billion in revenue. A little extra fat can be attractive in the right places.