NEW YORK (AP) - Verizon Communications Inc. posted a 15% earnings increase for the fourth quarter on Tuesday, as the shrinking economy did little to dampen consumer appetites for wireless, Internet and TV service.
The country's second-largest telecommunications provider earned $1.24 billion, or 43¢ per share, up from $1.07 billion, or 37¢ per share, a year earlier.
Excluding charges mainly for job cuts, earnings were 61¢ per share, matching the expectation of analysts polled by Thomson Reuters.
Revenue rose 3.4% to $24.6 billion from a year ago. That fell slightly short of analyst expectations at $24.74 billion.
Verizon's shares fell $1.49, or 4.8%, to $29.50 in early trading, after initially jumping in premarket trading on the release of the results.
Excluding the sale of service areas with 122,000 customers, Verizon Wireless added 1.4 million subscribers, slightly down from the 1.5 million it added in the third quarter. Of the new customers, 93% were on contracts with the company, meaning it has stayed aloof from the trend toward cheaper prepaid service.
"We have no evidence ... of customers trading down either on plans or features," said Chief Operating Officer Denny Strigl, on a call with analysts.
Verizon Wireless ended the year with 72.1 million customers. But it closed on the purchase of Alltel Corp. on Jan. 9, giving it more than 80 million customers and vaulting it past AT&T Inc. to first place in the U.S. cellular industry.
Verizon Wireless is a joint venture with Vodafone Group PLC of Britain. All of the venture's $11.1 billion in quarterly revenue is reflected on Verizon's books, but only 55% of its $3.8 billion in earnings.
Revenue shrank 2.7% to $11.9 billion on the wireline side, which includes Verizon's local-phone business and the services it sells to corporate and government customers. Verizon lost 12.2% of its residential phone lines in the past year, as customers signed on for phone service from cable companies or opted to use only their cell phones. As analysts had expected, the line losses sped up in the fourth quarter.
However, the wireline business added 303,000 TV customers and 282,000 high-speed Internet customers on fiber-optic connections in the quarter, both record numbers that "vastly exceeded" Wall Street expectations, according to analyst Christopher King at Stifel Nicolaus.
Verizon has embarked on a decade-long project to replace copper phone lines with optical fibers, enabling it to offer cable-type TV service and faster Internet speeds. Broadband and video services now account for 31% of revenue in the consumer wireline business, and the company has managed to make small gains in revenue despite the loss of regular phone lines.
The company did see a decline in sales of business services, and executives said they were noticing the effect of layoffs at other companies.
In the full year, Verizon earned $6.43 billion, or $2.26 per share, up from $5.52 billion, or $1.90 per share, in the previous year. Revenue in 2008 rose 4.2% to $97.4 billion from a year earlier.
Verizon didn't provide a specific forecast for 2009, but Chief Executive Ivan Seidenberg said the company expects to "continue to perform well."
All the same, the company is being cautious about its own spending. Chief Financial Officer Doreen Toben said the company expects to spend less on capital equipment than the $17.2 billion it laid out in 2008. That will affect vendors like Alcatel-Lucent that are already hard hit by the economic downturn.
Verizon reduced its wireline work force by 10,000 people during the year. Though it has been hiring on the wireless side, the company's payroll shrank to 223,880 from 232,417 during the year.
Toben said the company expects added pension funding requirements due to the drop in the stock markets to reduce earnings by 9¢ to 11¢ per share in 2009, less than some analysts had expected.
Verizon was the first major U.S. telecommunications company to report its earnings for the fourth quarter. AT&T reports Wednesday morning.
(Copyright 2009 by The Associated Press. All Rights Reserved.)