Verizon (NYSE:VZ) is the US's largest mobile telecoms provider, through its 55% held subsidiary Verizon Wireless. It's also one of the bellwethers of US fixed line telecoms - it was formed through the merger of GTW and Bell Atlantic, back in 2000.
But the share price has had a tough time in the last year or so. That reflects high capex as Verizon builds its fiber-to-the-home network, which so far hasn't started paying for itself, together with the impact of the economic slowdown. Only recently have the shares started to bounce back as speculation grows that Verizon will get rights to sell the iPhone next year (starting January 2010), bringing to an end AT&T's exclusivity on the Apple product.
Operating performance isn't dot-com style growth, but it doesn't look too rusty. The first quarter of 2010 saw revenues increasing 12%, though operating income fell 7% and and diluted earnings 75%.
Better talk you through that one. In fact, post tax earnings for the entire group of businesses was down 28.8%. But because of the corporate structure, and the heavy bias in growth towards the wireless business, minority shareholders (mainly Vodafone - LON:VOD) got 19.8% more net income while Verizon shareholders got 75% less. Even so, the dividend was raised again, with Verizon owners getting a payout of 47.5 cents a share, up from 46 cents in the first quarter last year.
What I do like about Verizon is that it's got real revenue growth. In a stock market dominated by cost-cutting profit stories with little real growth, it stands out with its 4.4% increase in retail wireless and 7.2% in business wireless customers - and 4.4% increase in total wireless revenues despite hot competition on price. Data revenues, in particular, were up 26%, and will be a key driver for future earnings.
Its FiOS (fibre-to-the-home) network is also beginning to generate revenue growth, with a 22% quarterly rise in broadband and video revenues, though it's still small in terms of the overall business.
So why the shortfall? I suspect the reason Verizon shares have been lagging has a lot to do with the corporate situation vis a vis Vodafone. Verizon Wireless, the joint venture between the two companies, hasn't paid a dividend since 2006, and Vodafone has been pushing for a resumption of the payout. That creates a lot of uncertainty over whether Verizon…
