No Honeymoon For Verizon

Communications Today, August 10, 2000

Verizon Communications [VZ] executives may some day look back on the merger between Bell Atlantic and GTE as the easiest part of launching the new company.

Just over a month since the merged company's shares began trading, Verizon is reporting its first quarterly report while dealing with a strike by two unions representing 85,000 workers in 12 states from Virginia to Maine.

The New York-based telecom service provider on Tuesday said it expects its earnings for this year will be less than analyst estimates. That announcement came after the company yesterday reported net income for the second quarter (April-June) of $4.9 billion, or $1.79 per share.

The combined net incomes of Bell Atlantic and GTE in the second quarter last year was $1.9 billion, or 70 cents per share. Verizon's quarterly report is its first since the companies merged in June.

Verizon executives attributed much of the change in their earnings forecasts to the forced spin-off of GTE's Internet arm into a separate company, Genuity.

Without Genuity, the company reported its earnings per share this year will fall to $2.90. Industry analysts had expected $3.15 per-share earnings this year from Verizon. With Genuity, earnings would increase 9.5 percent to 11.5 percent, as the company previously forecast.

The year's profit also is reduced by acquisitions announced this week by Verizon. The company is acquiring OnePoint Communications, which provides telecom services for residents of multiple dwelling units, and NorthPoint Communications Group, a digital subscriber line service provider.

The company's Verizon Wireless mobile unit added 800,000 new customers during the second quarter, 22 percent more than the same quarter a year ago, to end the period with 25.6 million customers, 14.7 percent more than in the second quarter of 1999. Wireless revenues totaled $4 billion, up 19 percent from $3.3 billion in the previous second quarter.

Verizon reported that wireless operating income for the seconc quarter, excluding transition costs related to the merger, grew 21.8 percent to $442 million. Operating cash flow from wireless businesses grew 10.8 percent to $1.3 billion.

Verizon Wireless launched operations in April. The network is a combination of Bell Atlantic, GTE and Vodafone AirTouch's [VOD] U.S. wireless operations.

The Bell Atlantic-GTE corporate merger was completed in June after the companies complied with fair-market requirements from U.S. telecom and trade regulators. Verizon shares began trading July 3 on the New York Stock Exchange.

Meanwhile, representatives from the company and the striking unions - the Communications Workers of America and the International Brotherhood of Electrical Workers - were scheduled to continue negotiating today in Washington.

Malcolm Spicer