October 30, 2000 9:10 AM PST

Verizon profits flat, revenues up 7 percent

Verizon Communications, the company formed by the merger of Bell Atlantic and GTE, reported flat earnings Monday, saying an 18-day labor strike in August affected its revenue growth.

Verizon reported an adjusted net income of $2 billion, or 73 cents a share, compared with $2 billion, or 72 cents, a year ago. This met the consensus estimate of analysts polled by First Call/Thomson Financial.

Including gains on asset sales and other adjustments, profits rose almost 40 percent to $3.5 billion, or $1.27 a share, compared with $2.5 billion, or 91 cents a share, in the third quarter of 1999.

"They reported a pretty solid quarter," said Michael Hodel, a telecommunications analyst with Morningstar. "They're still generating a ton of cash flow, and they're still spending really heavily to build out their wireless network and install DSL (digital subscriber line). It seems that they did what they set out to do."

Verizon said its revenues jumped 7.2 percent to $16.5 billion from $15.4 billion in the third quarter of 1999. Without the effects of the August labor see related story: Verizon strikestrike, revenue growth would have been about 7.4 percent, the company said.

Hodel described the effect of the labor strike as "pretty minimal." He added, "It seems like it was pretty much a nonevent for them from a financial perspective."

While it may have cut into revenues slightly, the labor strike did not affect the installation of DSL, the company said during its conference call, according to Hodel.

Verizon said it added 130,000 DSL subscribers this quarter, bringing its total to more than 350,000.

The company made progress in long-distance sales, too. Verizon said it added 281,500 long-distance customers in New York in the third quarter, bringing its total to 1.2 million. The company has also applied to sell long-distance service in Massachusetts.

"If they can get approval in that state, that would be a big plus for them," said Hodel.

Verizon Wireless, the company's wireless venture with Britain's Vodafone Group, reported 806,000 new wireless customers to its wireless unit, bringing its total subscribers to 26.3 million. Earlier this month, Verizon Wireless postponed a planned initial public offering because of market conditions.

Analysts say that given the spending power of the parent companies, the postponement should not affect Verizon Wireless' ability to remain well-funded.

 

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