Verizon Doing Well – Look At The Numbers?

Implications: Verizon is being honest.  The trade media and the analysts don’t seem to understand what is happening. Verizon is not your typical carrier.

Analysis: Verizon never said it was not being impacted by the recession.  Verizon said the recession is not having a “major” impact on the carrier.

When you dig down into the numbers of Verizon you will find that its international base is helping to bolster its numbers.  Yes wireless is helping as well.  But the international sector broadens the base.  There is nothing wrong with having that kind of diversity in your customer base.  Analysts want to infer via Verizon that all is well in the telecom sector, which is a dishonest thing to do.

Telecom carriers are working feverishly to reduce operating costs via job reductions, squeezing out every last bit of capacity out of  the base station ports, looking for revenue leaks, and selling as deep into the under 18 years of age customer base.  The carriers’ aggressive push to reduce operating costs has been underway since 3Q2007.

Verizon is a special case.  Unlike the other carriers in the USA, Verizon has MCI.  When Verizon purchased MCI (cheap) it acquired not only a domestic long distance business but also an international business as well.  One of the things I like about Verizon is that when it speaks about its financial performance, there is no hype, they make no pretense about representing the industry, they speak only of themselves, and what you find is that the company really does understand that telecom is about “managing pennies, nickels, dimes, and quarters”.  The company understands how to optimize its own business.

In regard to bleeding out local access lines, the numbers have been dropping for the last few years.  Local access lines are a flat revenue business but still a good margin business.  Local access lines are literally a legacy business.  In regard to Verizon, much of its landline revenues comes from a few dense urban markets.  Manhattan island in the City of New York still brings in more money per square mile than any market in the country.  Don’t forget, a few years ago Verizon wanted to sell of Upstate New York.  Hence, you can guess what the company thinks about landline in areas less dense than New York City, Boston, Washington, D.C., and Philadelphia.

Despite the fact that investors will not be happy to hear that Verizon’s subscriber adds have been almost entirely made up of post-paid users, the company added to its base.  Could the number of post-paid customers impact the company’s plans to sell high-end data services?  The answer is Yes.  However, we need to bear in mind that the company is still making money.

In a recession there are winners and losers.  Even a recession that is as long, deep, and wide as this recession is, there will be one company doing well in each sector.  Verizon has managed itself well.  It is being impacted by the recession but not as badly as many might think.  The company is managed intelligently and well.  The company does not go out of its way to seek a lot of marketing hype – it does what it has to do.