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Verizon Reports Strong 4Q and Year-End 2010 Results, Highlighted by Cash Flow, Wireless and FiOS Growth

NEW YORK Jan. 25, 2011

4Q HIGHLIGHTS

Consolidated

  • 93 cents 39 cents 22 cents 28 cents
  • $33.4 billion $16.9 billion

Wireless

  • 7.7 percent increase in service revenues from 4Q 2009; data revenues up 25.5 percent; 30.1 percent operating income margin and 47.5 percent Segment EBITDA margin on service revenues (non-GAAP).
  • 955,000 total net customer additions, excluding acquisitions and adjustments, in 4Q 2010; includes 872,000 retail postpaid net customer additions in the quarter; continued low retail postpaid churn of 1.01 percent.
  • 102.2 million total connections, includes 94.1 million total customers.

Wireline

  • 197,000 net FiOS Internet and 182,000 net FiOS TV customer additions; 4.1 million total FiOS Internet customers and 3.5 million total FiOS TV customers.
  • 10.7 percent increase in consumer ARPU from 4Q 2009; FiOS revenues now represent approximately 53 percent of total consumer revenues.
  • 7.5 percent increase in strategic enterprise revenues, which now represent approximately 44 percent of total global enterprise revenues.

Continued strong cash flow and growth in Verizon Wireless, FiOS and strategic enterprise services highlighted fourth-quarter and year-end 2010 earnings reported today by Verizon Communications Inc. (NYSE, Nasdaq: VZ)

93 cents 22 cents 39 cents 50 cents 6 cents 5 cents 28 cents

90 cents $1.72

Improved Earnings and Solid Momentum

Ivan Seidenberg

Strong Cash Flow Growth in 2010

$33.4 billion $31.4 billion $16.5 billion $400 million $16.9 billion

$26.4 billion

$592 million

Wireless Delivers Continued Strong Growth and Profitability

Verizon Wireless delivered strong growth in revenues, strong retail postpaid ARPU (average monthly service revenue per user), and growth in traditional customers and other connections.  Wireless service EBITDA margin was a record high.  In the fourth quarter of 2010:

  • Verizon Wireless added 872,000 retail postpaid customers, and 803,000 total retail customers, which includes a decrease of 69,000 retail prepaid customers.  These additions exclude acquisitions and adjustments.
  • At the end of the fourth quarter, the company had 87.5 million retail customers, which represented 93 percent of the company’s wireless customers.
  • The company also added 152,000 reseller customers in the fourth quarter.
  • The company had a total of 94.1 million customers at the end of the fourth quarter.  In addition, the company had 8.1 million other connections — such as machine-to-machine and telematics.  This was an increase of 186,000 net other connections in the quarter, and brought the number of total wireless connections to 102.2 million at year-end 2010.
  • At year-end 2010, 26 percent of Verizon Wireless’ retail postpaid customer base had smartphone devices, up from 15 percent at year-end 2009.  In fourth-quarter 2010, more than 75 percent of Verizon Wireless’ postpaid net adds were smartphones.
  • Retail postpaid churn remained low at 1.01 percent.  Total retail and total customer churn levels were 1.37 and 1.34 percent, respectively.  All churn levels improved year over year and sequentially.
  • $13.5 billion $5.0 billion $14.2 billion $16.1 billion $55.6 billion $63.4 billion
  • $53.50 $19.97 $51.84
  • Wireless operating income margin was 30.1 percent, an increase of 340 basis points year over year.  Segment EBITDA margin on service revenues (non-GAAP) was 47.5 percent, up 290 basis points over fourth-quarter 2009.  For full-year 2010, operating income margin was 29.5 percent, up 190 basis points over full-year 2009; segment EBITDA margin on service revenues was 46.9 percent, up 140 basis points.

Continued Growth for FiOS and Strategic Enterprise Services

In wireline businesses, Verizon continued to add customers served by its FiOS fiber-optic network in the U.S., and revenues continued to increase for strategic enterprise services worldwide.  In the fourth quarter of 2010:

  • Verizon added 197,000 net new FiOS Internet customers and 182,000 net new FiOS TV customers.  By year-end, Verizon had 4.1 million FiOS Internet and 3.5 million FiOS TV customers.
  • FiOS Internet penetration (customers as a percentage of potential customers) was 31.9 percent by the end of the quarter, with the product available for sale to 12.8 million premises.  This compares with 28.3 percent and 11.6 million, respectively, at year-end 2009.
  • FiOS TV penetration was 28.0 percent by the end of the quarter, with the product available for sale to 12.4 million premises.  This compares with 24.7 percent and 11.1 million, respectively, at year-end 2009.
  • FiOS revenues generated approximately 53 percent of consumer wireline revenues in fourth-quarter 2010, compared with approximately 50 percent in third-quarter 2010.
  • $1.8 billion
  • $88.85 $146
  • $4.0 billion
  • Segment EBITDA margin (non-GAAP) was 23.5 percent, compared with 22.7 percent in third-quarter 2010 and 22.5 percent in fourth-quarter 2009, as adjusted.

Additional Highlights

Wireless

  • $26.59 $27.72 $26.80 $27.55

  • In the fourth quarter, total data revenues were 37.1 percent of all service revenues, up from 31.8 percent in the fourth quarter 2009.

  • Verizon Wireless continued to invest in its 3G (third-generation) broadband network, the nation’s largest and most reliable 3G network.  Verizon’s 3G network provides more coverage than any other U.S. carrier and is available where more than 290 million people reside.

  • In December, Verizon Wireless launched its 4G LTE (fourth-generation Long Term Evolution) Mobile Broadband network, the fastest and most advanced 4G network in the U.S., in 38 major metropolitan areas covering one-third of all Americans and in more than 60 commercial airports.  With Verizon Wireless’ 4G LTE network, laptop users experience average data throughput speeds of up to 10 times faster than when on the company’s 3G network.  Verizon Wireless announced earlier this month that it would expand its 4G LTE network to an additional 140 markets by the end of 2011.

  • Concurrent with the launch of its 4G LTE Mobile Broadband network, Verizon Wireless introduced two 4G LTE USB modems:  the LG VL600 and the Pantech UML290, which are also compatible with the company’s 3G network.  Verizon Wireless unveiled 10 new 4G LTE consumer devices at the International Consumer Electronics Show earlier this month, including smartphones, tablets, mobile hot spot devices and notebooks that will be available in the first half of this year.

  • Jan. 11

  • During the fourth quarter, Verizon Wireless customers sent or received more than 180 billion text messages.  Customers also sent nearly 4.5 billion picture/video messages and completed more than 20 million music and video downloads from Verizon Wireless.

Wireline

  • $10.3 billion $7.9 billion

  • Broadband connections totaled 8.4 million at the end of the fourth quarter 2010, a 2.8 percent year-over-year increase.  This is a net increase of 52,000 from the third quarter 2010, as the increase in FiOS Internet connections more than offset a decrease in HSI connections.

  • July 1, 2010

  • The wireline workforce totaled 92,300 at year-end 2010, a decline of about 16,000 year over year, primarily as a result of incentive offers that have led to voluntary separations.

  • North America Europe Asia-Pacific

  • Asia-Pacific Europe Latin America

  • Multinational corporations, including Carlsberg and National Grid, completed new agreements, expanding their relationships with Verizon for a wide range of advanced communications and IT solutions.  Verizon also continued to win new government business, including an award from the U.S. General Services Administration to provide secure on-demand cloud computing service.

June 30, 2010 July 1, 2010 www.verizon.com/investor for reconciliations to generally accepted accounting principles (GAAP) for non-GAAP financial measures cited in this document.  

New York $106.6 billion www.verizon.com

www.verizon.com/news

NOTE: This document contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties.  For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.  The following important factors could affect future results and could cause those results to differ materially from those expressed in the forward-looking statements: the effects of adverse conditions in the U.S. and international economies; the effects of competition in our markets; materially adverse changes in labor matters, including workforce levels and labor negotiations, and any resulting financial and/or operational impact, in the markets served by us or by companies in which we have substantial investments; the effect of material changes in available technology; any disruption of our suppliers’ provisioning of critical products or services; significant increases in benefit plan costs or lower investment returns on plan assets; the impact of natural or man-made disasters or existing or future litigation and any resulting financial impact not covered by insurance; technology substitution; an adverse change in the ratings afforded our debt securities by nationally accredited ratings organizations or adverse conditions in the credit markets impacting the cost, including interest rates, and/or availability of financing; any changes in the regulatory environments in which we operate, including any loss of or inability to renew wireless licenses, and the final results of federal and state regulatory proceedings and judicial review of those results; the timing, scope and financial impact of our deployment of fiber-to-the-premises broadband technology; changes in our accounting assumptions that regulatory agencies, including the SEC, may require or that result from changes in the accounting rules or their application, which could result in an impact on earnings; our ability to complete acquisitions and dispositions; our ability to successfully integrate Alltel Corporation into Verizon Wireless’ business and achieve anticipated benefits of the acquisition; and the inability to implement our business strategies.

Verizon Communications Inc.  

Condensed Consolidated Statements of Income – As Adjusted

  (dollars in millions, except per share amounts)

3 Mos. Ended

3 Mos. Ended

12 Mos. Ended

12 Mos. Ended

Unaudited

12/31/10

12/31/09

% Change

12/31/10

12/31/09

% Change

Operating Revenues

$          26,395

$          27,091

(2.6)

$        106,565

$        107,808

(1.2)

Operating Expenses

Cost of services and sales

10,610

12,585

(15.7)

44,149

44,579

(1.0)

Selling, general & administrative expense

5,291

7,311

(27.6)

31,366

30,717

2.1

Depreciation and amortization expense

4,083

4,242

(3.7)

16,405

16,534

(0.8)

Total Operating Expenses

19,984

24,138

(17.2)

91,920

91,830

0.1

Operating Income

6,411

2,953

*

14,645

15,978

(8.3)

Equity in earnings of unconsolidated businesses

113

131

(13.7)

508

553

(8.1)

Other income and (expense), net

43

13

*

54

91

(40.7)

Interest expense

(567)

(686)

(17.3)

(2,523)

(3,102)

(18.7)

Income Before Provision for Income Taxes

6,000

2,411

*

12,684

13,520

(6.2)

Provision for income taxes

(1,352)

(40)

*

(2,467)

(1,919)

28.6

Net Income

$            4,648

$            2,371

96.0

$          10,217

$          11,601

(11.9)

Net income attributable to noncontrolling interest

$            2,009

$            1,754

14.5

$            7,668

$            6,707

14.3

Net income attributable to Verizon

2,639

617

*

2,549

4,894

(47.9)

Net Income

$            4,648

$            2,371

96.0

$          10,217

$          11,601

(11.9)

Basic Earnings per Common Share

Net income attributable to Verizon

$                .93

$                .22

*

$                .90

$              1.72

(47.7)

Weighted average number of common shares (in millions)

2,829

2,841

2,830

2,841

Diluted Earnings per Common Share (1)

Net income attributable to Verizon

$                .93

$                .22

*

$                .90

$              1.72

(47.7)

Weighted average number of common

shares-assuming dilution (in millions)

2,831

2,841

2,833

2,841

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