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Verizon Hits Targets

Wireless gains help the big telco keep pace with rival AT&T.
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(VZ) - Get Verizon Communications Inc. Report

hit fourth-quarter targets as its Verizon Wireless unit continues to add users at a record clip.

The New York telco made $1.66 billion, or 59 cents a share, for the quarter ended Dec. 31, down from the year-ago $3.04 billion, or $1.08 a share. Excluding certain items, latest-quarter earnings were 64 cents a share, in line with the Thomson First Call analyst consensus estimate. Revenue rose 5.8% from a year ago to $19.33 billion, beating the $19.16 billion analyst forecast.

"Verizon finished the year strongly, and as we begin 2006 our strategies are taking root," said CEO Ivan Seidenberg. "We continue to grow what is already a great customer base -- especially as we continue to introduce innovations in wireless and broadband services.

"At the same time, we are investing in our powerful networks to position Verizon for additional growth in the future. We see real momentum in these growth initiatives, and we look forward to seizing the opportunities we see in the large-business market with our new Verizon Business unit."

Verizon's growth businesses -- wireless, broadband, data and long-distance services -- contributed 59.6% to fourth-quarter 2005 revenue, compared with a 54.9% contribution to fourth-quarter 2004 revenue.

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Switched access lines totaled 48.8 million at the end of the fourth quarter 2005, a decline of 6.7% compared with the end of the fourth quarter 2004. This has been more than offset by increases of 47.6% in wireline broadband connections and 17.2% in total wireless customers over the same period.

Verizon Wireless revenues were $8.7 billion in the fourth quarter 2005, an 18.3% increase compared with $7.3 billion in the fourth quarter 2004 -- driven by continued strong customer growth and demand for data services. Wireless operating income margins were 25.8% for the fourth quarter and 22.8% for the year, the result of the company's continued focus on managing costs and efficiencies as it added record numbers of customers.

Verizon's wireline business segment added a net of 613,000 wireline broadband connections in the fourth quarter 2005. This is a broadband industry record, topping any prior quarterly total posted by a telecommunications or cable company.

This brings the company's year-end total to 5.1 million wireline broadband connections, representing 1.7 million net additions in 2005 -- a growth rate of 47.6% compared with year-end 2004. Wireline broadband connections include totals for both DSL and FiOS, Verizon's next-generation, fiber optic-based service.

Operating revenues on a comparable basis at Domestic Telecom were $9.4 billion in the fourth quarter 2005, a 1.8% decrease compared with the fourth quarter 2004. For the year, comparable wireline operating revenues were $37.6 billion, a 1.1% decrease compared with 2004.

In 2006, Verizon expects that net pension and other retirement benefit costs will reduce earnings by 34 cents to 36 cents per share, compared with the 30 cents per share in 2005.

Regarding 2006 capital spending, the company reiterated previous guidance, of $15.4 billion to $15.7 billion, excluding capital related to Verizon's recently closed merger with MCI, Inc. Verizon announced today that, with MCI, total 2006 capital spending is expected to be from $17.0 billion to $17.4 billion. This includes about $550 million in integration capital in 2006 to improve efficiencies and help achieve merger synergies, which have a net present value of roughly $8 billion in incremental revenues and operational savings, including investments in network and systems to achieve these savings.