Verizon earnings up 4.5 pct By PETER SVENSSON, AP Technology Writer

Verizon earnings up 4.5 pct By PETER SVENSSON, AP Technology Writer
1 hour, 53 minutes ago



NEW YORK - Verizon Communications Inc. reported second-quarter earnings that satisfied analyst expectations Monday and said its wireless arm would buy a rural cell-phone carrier to expand its reach.

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Investors found reasons to dislike the news, and the stock of the country's second largest telecommunications company fell 49 cents, or 1.2 percent, to $41.51, even as the broader market rebounded from last week's losses.

Verizon Wireless said it had agreed to buy Rural Cellular Corp., which provides cell phone service in 15 states under the Unicel brand, for $757 million, or $45 per share.

That's a stiff premium over the $31.81 closing price for Rural Cellular shares on Friday, but the stock hit a high of $46.34 in early July, fueled by acquisition speculation.

On Monday, the stock soared to $42.76.

Rural Cellular, based in Alexandria, Minn., has 716,000 subscribers. Most of its network is incompatible with Verizon Wireless', but compatible with AT&T and T-Mobile phones.

Verizon Wireless said it plans to move Rural Cellular's subscribers over to phones compatible with its network, but will maintain the older network for roaming by subscribers of other carriers.

Verizon is taking on about $1.9 billion in debt along with the acquisition, but said it expected the deal to save it $1 billion in roaming fees and operations expenses. Verizon sees the acquisition closing in the first half of next year.

Telecom analyst Thomas Watts at Cowen & Co. attributed the weakness in Verizon's stock Monday to traders selling the acquirer and buying the acquired, a common strategy. But there were contributing factors in Verizon's earnings report: Verizon reported somewhat more phone line losses than expected, along with weak broadband sales.

Overall, Watts said, he came away with "a positive feeling in the quarter," and sees the company continuing to boost its earnings.

Verizon earned $1.68 billion, or 58 cents per share, from April through June, up 4.5 percent from $1.61 billion, or 55 cents per share, in the same quarter last year. The latest per-share figure matched the average forecast of analysts polled by Thomson Financial.

Last year's figure included earnings from a number of business that have since been sold or spun off, including the high-margin directories publisher. Excluding those businesses, earnings in last year's second quarter were 43 cents per share.

Revenue rose 6.3 percent to $23.3 billion.

Verizon Wireless, the company's fastest-growing division, added 1.6 million customers in the second quarter, but lost 300,000 through the bankruptcy of Amp'd Mobile, which bought wholesale access to Verizon Wireless' network and resold it. Verizon Wireless ended the quarter with 62.1 million subscribers, just short of AT&T Inc.'s 63.7 million.

Verizon Wireless is a joint venture of Verizon Communications and Vodafone Group PLC of Britain. All of its revenue is counted on Verizon Communications' books, but only 55 percent of its profits, with the rest going to Vodafone.

Addressing competition from Apple Inc.'s iPhone, a much hyped handset introduced a month ago exclusively on AT&T's network, Verizon Chief Operating Officer Denny Strigl acknowledged the company has "seen an impact" in the rate of subscribers porting numbers to and from Verizon Wireless.

However, Strigl said, the company last week returned to adding two cellular customers for every one that it loses.

On the wireline side, revenues declined 1.1 percent to $12.6 billion, as Verizon kept losing former MCI long-distance customers and traditional copper phone lines.

However, retail customers in Verizon's local-phone service area spent almost 11 percent more, or an average of $57.47 per month, as they signed up for broadband Internet service via fiber optics.

The fiber-optic broadband service, FiOS, added 203,000 subscribers in the quarter for a total of 1.1 million. Of those, 515,000 were also signed up to get TV through the fiber, a 10-fold increase from a year ago.

For the first time, Verizon signed up more subscribers to broadband Internet service through FiOS than through copper phone lines.

It added just 85,000 copper-based digital subscriber lines, down from 239,000 in the first quarter.

"Frankly, we weren't as focused as we used to be on DSL for the quarter," Strigl said. "We have taken a lot of the technicians and the service reps that used to work DSL and tried to quickly get them up to speed on FiOS."

Strigl said the company aims to get DSL customer recruitment numbers back up.

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On the Net:

http://www.verizon.com

Rural Cellular: http://www.unicel.com