Shareholder Forum for Verizon Communications, Inc.

Forum Home Page

Verizon Forum Home Page

Program Reference


For other analyst and management views of the performance reported below, see


New York Times, July 29, 2008 article


The New York Times




July 29, 2008


TV Service Stalls for Verizon, but Increase in Wireless Customers Keeps Earnings Strong

Verizon Communications is having a harder time pushing its television service, which competes with the big cable companies, but the company said the slowing economy had not hurt its cellphone business.

In releasing its earnings report on Monday, Verizon said it added 1.5 million new wireless customers, the same number as last quarter. It was 25 percent fewer than the two million it added in the fourth quarter of 2007, but Verizon Wireless, which is a joint venture with Vodafone, said its churn rate — the pace at which customers defect to other carriers — fell to 1.1 percent from 1.2 percent in the previous quarter. By comparison, Sprint Nextel has a churn rate of 2.45 percent.

Analysts, however, were concerned about the pace at which Verizon was winning customers for its fiber optic delivery of television programming, called FiOS TV. Verizon added 176,000 customers in the last three months, compared with 263,000 customers in its first quarter. In addition, the company said it added 187,000 FiOS Internet customers.

“That FiOS is already seeing a sequential deceleration is a startling development,” a communications analyst at Sanford C. Bernstein & Company, Craig Moffett, wrote in a research report.

Dennis F. Strigl, Verizon’s president, was puzzled by analysts’ questioning of Verizon’s FiOS results.

“I’m not sure where the concern is coming from,” Mr. Strigl said in an interview after the company reported its second-quarter results.

He said it cost Verizon less to acquire FiOS television customers in the second quarter than it did six months ago because the company had been offering new customers a free 19-inch high-definition television, which cost the company $200 each. (The televisions were an incentive only in the first quarter.)

Verizon began offering the FiOS service, which the company hopes will compete with the major cable companies, in New York City on Monday. But as the slower adoption rates show, Verizon is entering a hotly competitive market where customers are as jealously guarded as a seat on a crowded subway.

Verizon sued Time Warner Cable earlier this year, saying some of its rival’s commercials included false and misleading statements. And Verizon has sparred with Comcast and Time Warner over marketing techniques that Verizon was using to retain customers who wanted to switch to a competitor.

In June, the Federal Communications Commission said Verizon could not talk customers out of switching to another phone service provider while waiting for their phone numbers to be transferred, a victory for Comcast and Time Warner Cable, which filed a complaint in February.

“It’s a natural phenomenon,” Mr. Strigl said of the aggressive customer tactics. “It happened in the early days of the wireless business.”

Verizon reported second-quarter net income of $1.88 billion, or 66 cents a share, a 12 percent increase compared with profit of $1.68 billion, or 58 cents a share, in the second quarter of last year. Revenue increased slightly to $24.1 billion, from $23.3 billion a year ago. Mr. Strigl said he was pleased with the results.

Verizon, like AT&T, Sprint Nextel and T-Mobile, sees data as the growth engine of its wireless business.

Mr. Strigl said more than 30 percent of the mobile devices Verizon is selling have access to the Internet, and also receive and send e-mail and text messages. By contrast, he said, “a year ago it was half that.”

Verizon’s expansion efforts could be thwarted if union-represented employees walk out when their contract expires on Aug. 2. (They voted last week to authorize a strike.) Verizon executives said they were confident that a resolution would be reached.

Mr. Strigl conceded that there was one area that had disappointed Verizon. The company lost 133,000 customers for its D.S.L. Internet service, which uses phone lines.

The loss had nothing to do with the flagging economy, he said. Many analysts have feared that customers tend to drop costly services when personal budgets need to be trimmed. Mr. Strigl attributed the loss to some customers switching to FiOS, while others defected to competitors.

Verizon also lost 920,000 residential and business telephone lines — they now tally 38.3 million — a decline of 8.5 percent year over year. The drop was steeper among residential customers, an 11.4 percent drop compared with the same period a year ago.


Copyright 2008 The New York Times Company




This Forum program is open, free of charge, to all Verizon Communications, Inc. ("VZ") shareholders and to any fiduciaries or professionals concerned with their investment decisions.  Its purpose is to provide shareholders with access to information and a free exchange of views on issues relating to their evaluations of alternatives, addressing issues described in the Forum Summary.

As stated in the posted Conditions of Participation, all Forum participants are expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants.  It is a Forum rule that participants will not be identified or quoted without their explicit permission.

The Verizon Forum program has been organized with the support of the Association of BellTel Retirees Inc., believed to be the world’s largest such organization with over 110,000 members who are retired employees of Verizon and its predecessor companies.

Inquiries and requests to be included in the Forum's distribution list may be addressed to  The information provided to Forum participants is intended for their private reference, and permission has not been granted for the republishing of any copyrighted material.

All material on this web site is published by Gary Lutin, who is responsible for conducting the Forum.