Verizon Reports Continued Strong Growth in 1Q 2008

Verizon
Communications Inc. (NYSE:VZ) today reported another quarter of strong sales
and operational results.  In the first quarter 2008, Verizon Wireless continued
to lead the industry in key metrics, and Verizon's Wireline business reported
continued strong growth in sales of domestic FiOS services and global strategic
business services.

 

Verizon reported first-quarter 2008 earnings of 57 cents in
diluted earnings per share (EPS).  This compares with first-quarter 2007 earnings
of 51 cents per share, both before and after an extraordinary item and income
from discontinued operations that have been divested.

 

On an adjusted basis (non-GAAP), first-quarter 2008 earnings
were 61 cents per share.  This is a 13.0 percent increase, compared with 54
cents per share before discontinued operations in the first quarter 2007 --
Verizon's fifth consecutive quarter of a double-digit percentage increase in
adjusted EPS.

 

Adjusted earnings in the first quarter 2008 excluded 4 cents
per share in special items: 3 cents per share for costs related to the spinoff
of wireline access lines in three states, completed March 31, 2008; and 1 cent
per share in merger integration costs.  Adjusted earnings in the first quarter
2007 excluded an extraordinary loss of 5 cents in EPS from the nationalization
and sale of Verizon's interest in Compañía Anónima Nacional Teléfonos de
Venezuela.

 

Strong Results in Face of Economy

 

"Verizon has weathered the current economic uncertainty
with strong first-quarter results," said Verizon Chairman and CEO Ivan
Seidenberg.  "I am also confident of our position over the long term
because we have further opportunities to drive revenue growth and further
opportunities to eliminate costs.

 

"With our strong cash flows, we continue to invest in
growth, evolve our business and return value to shareholders," he said. 
"In a larger sense, Verizon is leading an industry transformation.  In
wireless, we are changing the game with our open development initiative, our
plans for next-generation technology deployment, and our strategic investment
in spectrum for nationwide broadband services.  In wireline, we have spun off
nonstrategic access lines, and we continue to introduce innovative FiOS and
enterprise services."

 

Consolidated Growth and Share Repurchases

Verizon's total operating revenues grew 5.5 percent to $23.8
billion, compared with the first quarter 2007.  Total operating expenses
increased 3.8 percent to $19.5 billion over the same period.

 

Verizon's operating income grew 14.1 percent to $4.3
billion, compared with the first quarter 2007.  On an adjusted basis
(non-GAAP), operating income grew 14.2 percent to $4.5 billion.  Operating
income margin rose to 18.2 percent, compared with 16.8 percent in the first
quarter 2007.  On an adjusted basis, Verizon's operating income margin rose to
18.7 percent, compared with 17.3 percent in the first quarter 2007.

 

Cash flows from continuing operations totaled $5.4 billion
through the first three months of 2008, up 6.9 percent over the same period
last year.  During the first quarter 2008, Verizon took advantage of market
conditions to repurchase $1 billion of its common stock.

 

Total debt was $35.8 billion, compared with $31.2 billion at
year-end 2007, and Verizon ended the quarter with $5.5 billion in cash and
equivalents.  Most of this cash, along with

$4 billion in capital raised through long-term borrowings in
April, has been used to pay for the wireless licenses won in the Federal
Communications Commission's 700 MHz spectrum auction.

 

Verizon Wireless Leads Industry in Key Metrics

 

Verizon Wireless continued to lead the industry with the
most retail customers, the lowest churn and the highest profitability.  In the
first quarter:

• Of the 1.5 million total net
  customer additions, 1.3 million were retail post-paid customers.
• Total churn was an
  industry-leading 1.19 percent.  Among the company's retail post-paid
  customers, churn was even lower, at 0.93 percent.
• Revenues totaled $11.7 billion,
  up 13.2 percent year over year.  Service revenues were $10.1 billion, an
  increase of 12.8 percent year over year, driven by customer growth and
  demand for data services.  This is the first time quarterly service
  revenues have topped $10 billion.
• ARPU levels (average monthly
  revenue per customer) increased year over year for the eighth consecutive
  quarter.  Retail service ARPU was $51.40, up 1.3 percent year over year;
  retail data ARPU was $11.94, up 33.4 percent over the same period last
  year.
• Wireless operating income
  margin was 27.9 percent, the highest ever.
• EBITDA margin on service
  revenues (non-GAAP) was 44.9 percent.  (EBITDA is earnings before
  interest, taxes, depreciation and amortization.)

 

Another Quarter of Strong Growth in FiOS, Strategic Services

 

Verizon's Wireline business, which consists of Verizon
Telecom and Verizon Business, reported continued strong growth in FiOS
customers and in sales of enterprise strategic services.  Results through the
first quarter 2008 include operations in Maine,
New Hampshire and Vermont that were spun off to Verizon
shareholders and merged into FairPoint Communications Inc. on the final day of
the quarter.  In the first quarter:

• Verizon added a net of 263,000
  new FiOS TV customers.  The company had 1.2 million FiOS TV customers in
  total as of the end of the quarter, having added more than 850,000 FiOS TV
  customers since the end of the first quarter 2007.
• Verizon added a net of 266,000
  new broadband connections -- 262,000 from FiOS Internet service.  Total
  broadband connections were 8.5 million (6.7 million DSL-based Verizon High
  Speed Internet connections and 1.8 million FiOS Internet connections), an
  increase of 14.9 percent compared with the first quarter 2007.
• Broadband and video revenues
  from consumer and small-business customers topped $1 billion, representing
  year-over-year quarterly growth of nearly 50 percent (56 percent growth in
  the consumer segment of broadband and video customers).
• Growing revenue from broadband
  and video services drove consumer ARPU in legacy Verizon wireline markets
  (which excludes consumer markets served by the former MCI) to $61.02, a
  9.6 percent increase compared with last year's first quarter.  The ARPU
  among FiOS customers was approximately $129 per month.
• Wireline data revenues -- which
  now represent nearly 40 percent of total wireline revenues -- were $4.9
  billion, an increase of 14.8 percent compared with the first quarter
  2007.  This includes revenues from consumer broadband services, and
  revenues from wholesale data transport and sales of Verizon Business data services.
• Verizon Business had revenues
  of $5.2 billion, or growth of 0.4 percent compared with last year's first
  quarter.  This is Verizon Business' sixth consecutive quarter of
  year-over-year, pro-forma revenue growth (non-GAAP, calculated as if
  Verizon and MCI had merged on Jan. 1, 2005).  Global enterprise revenue,
  representing retail sales, increased 2.0 percent to $3.9 billion, compared
  with last year's first quarter.
• Strong sales of key strategic
  services -- such as IP (Internet protocol), managed services, Ethernet and
  optical ring services -- continued to drive Verizon Business' growth. 
  These services generated $1.4 billion in revenue, up 23.5 percent from
  last year's first quarter.

 

Additional Highlights

 

Wireless

• The company added 1.5 million
  retail customers -- the most in the industry.  At the end of the first
  quarter 2008, 97 percent of the company's base was retail (post-pay and
  pre-pay).

 

• Verizon Wireless continued to
  lead the industry in cost efficiency.  Cash expense per customer
  (non-GAAP) was $28.05 in the first quarter 2008, an increase of 0.6
  percent over the first quarter 2007 and a decrease of 2.4 percent from the
  fourth quarter 2007.

 

• Total data revenues were up
  48.9 percent over the prior year, contributing $2.3 billion.  The company
  had 48.1 million retail data customers in March (nearly 74 percent of the
  retail customer base), a 33.8 percent increase over the prior year.

 

• In March, Verizon Wireless held
  its first Open Development Initiative (ODI) conference to provide minimum
  technical standards required for creating products that can physically
  connect to the Verizon Wireless network, and a process to certify that
  these products will operate on the company's network.  Plans call for
  customers to have the option to use products and services certified
  through the ODI process by the end of the year.

 

• The company continued to extend
  the reach of its nationwide high-speed wireless broadband network, powered
  by EV-DO Revision A (Rev. A) technology, which was available to more than
  240 million Americans by the end of the first quarter.  More than 58
  percent of the company's retail customers -- 38 million -- had
  broadband-capable devices at the end of the quarter.

 

• In the 700 MHz auction, Verizon
  Wireless was the winning bidder for a nationwide spectrum footprint in the
  C-Block group of licenses, as well as 102 licenses for individual markets
  across the country.  The spectrum purchase is a critical piece of the
  company's overall broadband strategy.

 

• During the quarter, Verizon
  Wireless announced additions to its leading lineup of broadband-capable
  devices -- for business connectivity and productivity, managing family
  schedules and communications on the move, and for mobile entertainment. 
  The new smartphones include the BlackBerry Curve and the MotoQ9c,
  available in May, and the XV 6900, which launched earlier this month.  New
  handsets include the enV 2 by LG and the Alias by Samsung.  Verizon
  Wireless offers some 25 multimedia phones at various price points.

 

• During the quarter, Verizon
  Wireless customers sent or received more than 58 billion text messages and
  1.1 billion picture/video messages.  Customers also completed 34.6 million
  music and video downloads.

 

Wireline

• Wireline total operating
  revenues were $12.3 billion, a 1.4 percent decrease compared with the
  first quarter 2007.  Wireline total operating expenses were $11.2 billion,
  a 1.0 percent decrease compared with the first quarter 2007.

 

• Verizon Telecom's total
  revenues of $7.8 billion decreased by 2.5 percent, compared with the first
  quarter 2007 -- an improvement of 30 basis points over the year-over-year
  quarterly revenue decrease in the fourth quarter 2007.  In legacy Verizon
  consumer markets, year-over-year revenues grew 0.9 percent, comparing
  first-quarter 2008 with first-quarter 2007.

 

• Verizon's broadband
  fiber-to-the-premises network, which delivers FiOS Internet and FiOS TV
  services to customers, passed 10.4 million premises by the end of the
  quarter.

 

• FiOS Internet was available for
  sale to 7.9 million premises by the end of the quarter.  Penetration for
  the service averaged 22.9 percent across all markets.  FiOS TV was
  available for sale to 6.5 million premises by the end of the quarter. 
  Penetration for the service averaged 18.7 percent across all markets.

 

• Earlier this month, Verizon
  filed an application for the New
  York City video franchise, covering 3.1 million
  homes, many of which are in multiple dwelling units.  Verizon already
  passes about 20 percent of these premises with fiber, and the company
  expects to begin selling FiOS TV service in the city later this year.

 

• Verizon Business, a global IP
  leader and network-based solutions partner for enterprise customers, again
  significantly enhanced its capabilities in the quarter.  New offerings
  included a server-virtualization service that consolidates multiple IT
  resources, high-definition video conferencing, expansion internationally
  of managed local-area-network service, and a service to manage network
  security threats using a single piece of equipment.

 

• Verizon Business continued to
  expand its reach into high-growth, global markets.  Joint venture Verizon
  Business India received international and national long-distance licenses,
  and a consortium that includes Verizon Business was awarded a license to
  provide services in Saudi
  Arabia.  Additionally, Verizon Business
  obtained final FCC approval to activate and operate the Trans-Pacific
  Express submarine cable system in the U.S.

 

• Verizon Business continued to
  expand and enhance its global network.  It announced deployment of a
  meshed architecture on the trans-Pacific portion of the network to provide
  more route diversity.  The company also installed 18 additional IP-based
  switches globally, deployed its first ultra-long-haul (ULH) route outside
  of the U.S. in Japan, turned up ULH on six additional U.S. routes, and deployed a new multiplexer
  technology in an initial five U.S. markets that enables
  remote configuration and provisioning of bandwidth.

 

• New commercial customer agreements
  included The Bank of New York Mellon, Commerce Bank, Cuatrecasas, Extended
  Stay Hotels, Indesit Company SpA, Komatsu Ltd, Swedish Match AB, TeleTech
  and Weyerhaeuser.  In addition, the company signed new contracts with
  several U.S.
  government agencies, including the Department of Veterans Affairs and
  Department of Defense. 

 

Verizon Communications Inc. (NYSE:VZ), headquartered in New
York, is a leader in delivering broadband and other wireline and wireless
communication innovations to mass market, business, government and wholesale
customers.  Verizon Wireless operates America's most reliable wireless
network, serving more than 67 million customers nationwide.  Verizon's Wireline
operations include Verizon Business, which delivers innovative and seamless
business solutions to customers around the world, and Verizon Telecom, which
brings customers the benefits of converged communications, information and
entertainment services over the nation's most advanced fiber-optic network.  A
Dow 30 company, Verizon employed a diverse workforce of approximately 232,000
as of the end of the first quarter 2008 and last year generated consolidated
operating revenues of $93.5 billion.  For more information, visit www.verizon.com.