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The fourth quarter brought mixed results for Verizon (News - Alert) Corporation. While Verizon Wireless witnessed a rise in the number of its customers by approximately 2.3 million subscribers, Verizon Communications Inc. had to suffer a cut in profit because of restructuring costs.

 

On Monday, Verizon reported a 38% decline in its profits but insisted that the growth it achieved in new high-capacity fiber-optic Internet and DSL business had outpaced the decline in number of traditional telephone customers. In the fourth quarter of 2005, Verizon had earned a profit of $1.66 billion, or 59 cents per share. Compared to that its profit dropped in 2006 as it earned a profit of $1.03 billion, or 35 cents per share. These statistics reflect a charge in the sale of Verizon’s operations in the Dominican Republic for the tune of $541 million, or 19 cents per share.

 

Verizon asserts that the cut in profit is due to many factors such as taxes on the sale of assets. But even after recording a cut in profits, Verizon surged ahead of the expectations of many industry experts and recorded a rapid growth in its customer base. But even this growth was not enough to challenge the number one U. S carrier by subscribers, AT&T (News - Alert) Inc., which reported a net gain of 2.4 million customers during the holiday quarter. As it stands now, AT&T, formerly named Cingular Wireless, ended the year with nearly 61 million subscribers while Verizon reported a 59.1 million subscriber base at the end of 2006.

 

But Verizon outperformed its rivals in other fronts. Owned jointly with Vodafone Group (News - Alert) PLC, Verizon’s revenue increased by 16.3 percent to a market-leading $10.10 billion compared with $8.69 billion in 2005. Also, the ‘churn rate,’ which indicates the number of subscribers switching to a rival network also came down, averaging 1.14 percent of the customer base per month.

 

The major area of worry for Verizon lies in the areas of local and long-distance phone business, which continued to shrink even in this quarter. Verizon will look to cover up these losses with the growth in the new FiOS broadband and TV network, customers for DSL Internet access and the former MCI’s corporate services. The decline in the local phone business market for Verizon was apparent as it witnessed the total number of phone lines across company’s local network declining by nearly 900,000 to roughly 45.1 million. But Verizon believes that this loss will be balanced by a gain of 409,000 broadband lines, which makes it around 7 million total subscribers.

 

Verizon foresaw this change earlier and worked towards securing a customer base for the broadband business. This included installing the high-capacity fiber-optic lines across half of its local phone network replacing its copper phone wires. This cost Verizon $23 billion and gave 165,000 new customers for its FiOS Internet services. The results started showing as the year ended, as Verizon achieved a penetration rate of 14% reaching 4.8 million homes with 687,000 customers.

 

Subscribers to FiOS TV, Verizon’s cable TV services, increased by 89,000 for a year-end total of 217,000. This reflected a 9 percent penetration rate reaching 2.4 million homes.

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