Verizon's good and bad news

Dividend strong, but FIOS and Internet fiber are disappointing

By Jim J. Jubak Oct 26, 2009 4:06PM

Jim JubakThird-quarter earnings, announced before the opening on Monday, should be a reminder of why I added Verizon (VZ) to my Dividend Income portfolio rather than to any of my more growth-oriented portfolios on October 9th.


Making enough money to pay the stock's 6.6% dividend doesn't seem to be a problem; getting enough growth in the new businesses to compensate for the decline in the old businesses continues to be a challenge.


The company did manage to beat Wall Street's earnings estimates for the quarter by a penny a share. Revenue came in as expected at $27.3 billion, up 10.2% from the third quarter of 2008.


The total number of wireless customers grew to 89 million. That's a 26% increase. 


But Verizon still trailed archrival AT&T (T), which added 2 million customers in the quarter to Verizon's 1.3 million. The difference, of course, was AT&T's exclusive deal to sell Apple's (AAPL) iPhone.


But the real problem was the mixed picture on the profitable data and video services that are Verizon's future. Sales of data services rose 48%, but customer turnover climbed to 1.49% from 1.33% in the third quarter of 2008. 


Turnover, or “churn,” as it's called by wireless operators, is a real profit killer, since it costs so much to acquire a new customer to make up for those that have departed.


The numbers from Verizon's FIOS TV and Internet fiber network, however, were the biggest disappointment. The company added fewer customers this quarter -- 198,000 for its FIOS Internet and 191,000 for its FIOS TV product -- than last quarter and than analysts expected. For example, Verizon added 300,000 FIOS TV customers in the second quarter of 2009.


That's not good news, since the company is spending $23 billion this year and next to build out its high-speed TV and Internet fiber network.


At the time of this writing, Jim Jubak did not own or control shares of any company mentioned in this post.

1Comment
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

124
124 rated 1
279
279 rated 2
471
471 rated 3
714
714 rated 4
642
642 rated 5
604
604 rated 6
614
614 rated 7
450
450 rated 8
303
303 rated 9
115
115 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
ARCPAMERICAN REALTY CAPITAL PROPERTIES Inc10
BIDUBAIDU Inc10
CITCIT GROUP Inc NEW10
HPQHEWLETT PACKARD CO10
ITUBITAU UNIBANCO BANCO MULTIPLO S.A.10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.