Frontier will acquire Verizon's wireline business in 14 states, increasing the number of access lines in its portfolio to 7 million.
Frontier expects to save about $500 million in costs annually from the deal, by leveraging its existing networks and infrastructure.
The deal continues Verizon's strategy of focusing on its core areas, where it is upgrading its phone lines to fiber optics, enabling it offer TV service and faster Internet access. It sold off its phone lines in Maine, New Hampshire and Vermont for $2.3 billion last year to Fairpoint Communications Inc.
The agreement would give Frontier 4.8 million phone lines to residential and small business customers and 1 million broadband connections. Frontier currently has 2.3 million customers.
Verizon shareholders will own between 66 percent and 71 percent of the new company after the deal closes, while Frontier shareholders will own between 29 percent and 34 percent. The deal is expected to close within 12 months.
Analyst Christopher King at Stifel Nicolaus noted that buyers of Verizon phone lines have fared badly in the past — Fairpoint is struggling with its debt load, and the buyer of Verizon's Hawaiian business is in bankruptcy. But Frontier will actually reduce its debt load relative to its earnings through the transaction, King said.
Citigroup Inc and Evercore Partners acted as financial advisers to Frontier. Barclays Cap and JPMorgan Securities advised Verizon.
Showing posts with label verizon wireless. Show all posts
Showing posts with label verizon wireless. Show all posts
Wednesday, May 13, 2009
Thursday, December 4, 2008
AT&T and Verizon Can Brave the Headwinds
AT&T and Verizon, the leading telecommunications companies in the U.S., both look attractive to own for the short and long term.
AT&T has a market cap of $164 billion with projected 2008 revenue of $124 billion. Verizon has a market cap of $91 billion with projected 2008 revenue of $97 billion. AT&T should end this year with about $64 billion in net debt. Verizon has about $43 billion in debt but needs to finance its $27 billion purchase of Alltel.
Both stocks have reasonably low valuations and good dividend yields, which provide downside protection. And both companies have recession-resistant business models due to the utility-like nature of most of their revenue streams. While competition is tough in all the businesses that both companies compete in, the only area that is clearly in secular decline is consumer wireline, where access lines are falling due to wireless substitution and inroads by cable companies.
Enterprise services to corporations represent about 25% of revenue for each company and currently face cyclical pressures. Wireless is the primary growth business, at about 40% of revenue, and advanced consumer services such as TV and high-speed Internet are also growth businesses, even though they account for only 5% of revenue.
These revenue mixes should enable both AT&T and Verizon to at least maintain flat revenue and earnings growth in 2009 and probably eke out small gains. Estimates call for low-to-mid single-digit gains on both metrics. Investors will seek out the defensive nature of AT&T and Verizon while also understanding that the long-term growth story is improving as the business mix continues to shift toward the growth businesses.
Jim Cramer succinctly nailed the long-term attraction of AT&T and Verizon. He noted that both companies' competitive positions are improving rapidly as they come to dominate the business-facing telecom industry and develop an oligopoly with the cable companies when facing consumers. Further, Jim notes that the trend toward wireless and digital communication benefits the telcos.
The shift to wireless and digital communication is evident in the revenue mixes and gives AT&T and Verizon a chance to grow in 2009 despite the massive economic headwinds. Both companies also have the opportunity to use their relatively strong stock prices and still-open access to credit markets to further enhance their digital positioning via acquisition. For example, Alltel is a win for Verizon, and AT&T has quietly scooped up a few small wireless players to enhance its geographic footprint.
The biggest risk facing AT&T and Verizon is that the wireless business could slow down more than expected. Trends in voice are already under pressure, with average revenue per user falling and new subscriber growth slowing. The shift to smartphones hurts margins in the near term as phone subsidies soar. This is a worthwhile investment if data growth continues. If wireless data growth, which has been near 50%, slows more sharply than expected, the defensive nature of AT&T and Verizon will be seriously undermined. Keep an eye on smartphone sales for any sign of slowing.
A second fear is that enterprise spending proves more cyclical or has a deeper cyclical downturn than expected. A key driver of enterprise is employment at larger corporations, so unemployment rising to the worst predictions of 10% would likely lead to estimate cuts that take away the defensive veneer of AT&T and Verizon.
I have written positively on a regular basis about AT&T and Verizon but at this time I do not own either stock for client or personal accounts.
AT&T and Verizon provide near-term defensive characteristics with improving long-term growth profiles as communication continues its relentless shift toward wireless and digital applications. High current yields and above-average financial strength provide assurance for nervous investors.
AT&T has a market cap of $164 billion with projected 2008 revenue of $124 billion. Verizon has a market cap of $91 billion with projected 2008 revenue of $97 billion. AT&T should end this year with about $64 billion in net debt. Verizon has about $43 billion in debt but needs to finance its $27 billion purchase of Alltel.
Both stocks have reasonably low valuations and good dividend yields, which provide downside protection. And both companies have recession-resistant business models due to the utility-like nature of most of their revenue streams. While competition is tough in all the businesses that both companies compete in, the only area that is clearly in secular decline is consumer wireline, where access lines are falling due to wireless substitution and inroads by cable companies.
Enterprise services to corporations represent about 25% of revenue for each company and currently face cyclical pressures. Wireless is the primary growth business, at about 40% of revenue, and advanced consumer services such as TV and high-speed Internet are also growth businesses, even though they account for only 5% of revenue.
These revenue mixes should enable both AT&T and Verizon to at least maintain flat revenue and earnings growth in 2009 and probably eke out small gains. Estimates call for low-to-mid single-digit gains on both metrics. Investors will seek out the defensive nature of AT&T and Verizon while also understanding that the long-term growth story is improving as the business mix continues to shift toward the growth businesses.
Jim Cramer succinctly nailed the long-term attraction of AT&T and Verizon. He noted that both companies' competitive positions are improving rapidly as they come to dominate the business-facing telecom industry and develop an oligopoly with the cable companies when facing consumers. Further, Jim notes that the trend toward wireless and digital communication benefits the telcos.
The shift to wireless and digital communication is evident in the revenue mixes and gives AT&T and Verizon a chance to grow in 2009 despite the massive economic headwinds. Both companies also have the opportunity to use their relatively strong stock prices and still-open access to credit markets to further enhance their digital positioning via acquisition. For example, Alltel is a win for Verizon, and AT&T has quietly scooped up a few small wireless players to enhance its geographic footprint.
The biggest risk facing AT&T and Verizon is that the wireless business could slow down more than expected. Trends in voice are already under pressure, with average revenue per user falling and new subscriber growth slowing. The shift to smartphones hurts margins in the near term as phone subsidies soar. This is a worthwhile investment if data growth continues. If wireless data growth, which has been near 50%, slows more sharply than expected, the defensive nature of AT&T and Verizon will be seriously undermined. Keep an eye on smartphone sales for any sign of slowing.
A second fear is that enterprise spending proves more cyclical or has a deeper cyclical downturn than expected. A key driver of enterprise is employment at larger corporations, so unemployment rising to the worst predictions of 10% would likely lead to estimate cuts that take away the defensive veneer of AT&T and Verizon.
I have written positively on a regular basis about AT&T and Verizon but at this time I do not own either stock for client or personal accounts.
AT&T and Verizon provide near-term defensive characteristics with improving long-term growth profiles as communication continues its relentless shift toward wireless and digital applications. High current yields and above-average financial strength provide assurance for nervous investors.
Monday, October 27, 2008
Verizon 3Q earnings up 31 percent
Starting the week off with financial news, let's hope this is alot better than last week news. I know alot will be happening in financial news. You have earnings coming from a few companies this week.
So far home sale are up 2.7% for the month of September. Still way down from where they should be. But you have Verizon Wireless posting pretty good earning for the quarter. Something positive to write about. Just need alot more news like this.
Verizon Communications Inc. said Monday earnings rose 31 percent in the third quarter as wireless did better than expected, while its traditional phone business continued to decline.
The country's second largest telecommunications company, after AT&T Inc., earned $1.67 billion, or 59 cents per share, up from $1.27 billion, or 44 cents a share, a year ago.
Revenue rose 4.1 percent to $24.7 billion.
Excluding charges for job cuts and merger costs, Verizon earned 66 cents per share, matching the average estimate of analysts polled by Thomson Reuters. They were expecting $24.52 billion in revenue.
Chief Executive Ivan Seidenberg said business was holding up well despite the economic turmoil, but said it would have an effect in the current quarter.
"For the Christmas season, consumer spending will be somewhat lighter, and business spending will be somewhat curtailed," he said in a conference call.
Seidenberg said the company expects to increase earnings, excluding items, by 8 percent from last year. At the beginning of the year, it had put the increase at 8 percent to 10 percent.
The new forecast indicates fourth-quarter earnings of 62 cents per share, falling below the 65 cents per share analysts are expecting.
Investors, however, found Verizon's results reassuring, sending shares up $2.27, or 9.1 percent, to $27.35 in morning trading.
Seidenberg also said Verizon Wireless still views its planned acquisition of Alltel Corp. as attractive, even though borrowing costs will be higher than when the deal was announced this summer. There had been speculation that the company would back away from the deal due to the turmoil in the credit market.
Verizon Wireless added 1.5 million subscribers in the quarter, more than most analysts had expected, particularly after AT&T reported adding 2 million subscribers in the period. Of those, nearly a million were people who came over from other carriers to get the iPhone, which is exclusive to AT&T.
Verizon Wireless also added 600,000 subscribers through the acquisition of Rural Cellular Corp., and ended the quarter with 70.8 million customers.
Verizon Wireless is a joint venture with Vodafone Group PLC. All of its $12.7 billion in quarterly revenue but only 55 percent of its $3.47 billion in operating income are recorded on Verizon's books.
On the wireline side, losses of home phone lines sped up. Verizon had 2.9 million fewer home phone lines than a year ago, a 12 percent decrease.
"Although the capital markets and economy may present challenges, we will continue to execute on our business plan and invest for future growth," Seidenberg said.
The charges in the quarter included $164 million after tax in severance and other costs for cutting 2,700 management-level jobs on the wireline side. However, the company is hiring in the growing areas of its business and the overall work force is nearly steady at 228,000, said Chief Operating Officer Denny Strigl.
Verizon lost 96,000 DSL subscribers in the quarter, fewer than the 133,000 it lost in the previous quarter. It added 233,000 subscribers to its FiOS fiber-optic TV service.
Chief Financial Officer Doreen Toben said Verizon didn't see a significant increase in its borrowing costs in the third quarter, despite the credit-market situation, because most of the company's loans have fixed rates. It was paying higher rates for a while on its short-term commercial paper but the effect was marginal.
Verizon wireless and At&t will have a tough time this year. There's just alot more places people will spend there money than on phone service. But none-the-less at&t and Verizon should make it out this year alot better than some companies.
So far home sale are up 2.7% for the month of September. Still way down from where they should be. But you have Verizon Wireless posting pretty good earning for the quarter. Something positive to write about. Just need alot more news like this.
Verizon Communications Inc. said Monday earnings rose 31 percent in the third quarter as wireless did better than expected, while its traditional phone business continued to decline.
The country's second largest telecommunications company, after AT&T Inc., earned $1.67 billion, or 59 cents per share, up from $1.27 billion, or 44 cents a share, a year ago.
Revenue rose 4.1 percent to $24.7 billion.
Excluding charges for job cuts and merger costs, Verizon earned 66 cents per share, matching the average estimate of analysts polled by Thomson Reuters. They were expecting $24.52 billion in revenue.
Chief Executive Ivan Seidenberg said business was holding up well despite the economic turmoil, but said it would have an effect in the current quarter.
"For the Christmas season, consumer spending will be somewhat lighter, and business spending will be somewhat curtailed," he said in a conference call.
Seidenberg said the company expects to increase earnings, excluding items, by 8 percent from last year. At the beginning of the year, it had put the increase at 8 percent to 10 percent.
The new forecast indicates fourth-quarter earnings of 62 cents per share, falling below the 65 cents per share analysts are expecting.
Investors, however, found Verizon's results reassuring, sending shares up $2.27, or 9.1 percent, to $27.35 in morning trading.
Seidenberg also said Verizon Wireless still views its planned acquisition of Alltel Corp. as attractive, even though borrowing costs will be higher than when the deal was announced this summer. There had been speculation that the company would back away from the deal due to the turmoil in the credit market.
Verizon Wireless added 1.5 million subscribers in the quarter, more than most analysts had expected, particularly after AT&T reported adding 2 million subscribers in the period. Of those, nearly a million were people who came over from other carriers to get the iPhone, which is exclusive to AT&T.
Verizon Wireless also added 600,000 subscribers through the acquisition of Rural Cellular Corp., and ended the quarter with 70.8 million customers.
Verizon Wireless is a joint venture with Vodafone Group PLC. All of its $12.7 billion in quarterly revenue but only 55 percent of its $3.47 billion in operating income are recorded on Verizon's books.
On the wireline side, losses of home phone lines sped up. Verizon had 2.9 million fewer home phone lines than a year ago, a 12 percent decrease.
"Although the capital markets and economy may present challenges, we will continue to execute on our business plan and invest for future growth," Seidenberg said.
The charges in the quarter included $164 million after tax in severance and other costs for cutting 2,700 management-level jobs on the wireline side. However, the company is hiring in the growing areas of its business and the overall work force is nearly steady at 228,000, said Chief Operating Officer Denny Strigl.
Verizon lost 96,000 DSL subscribers in the quarter, fewer than the 133,000 it lost in the previous quarter. It added 233,000 subscribers to its FiOS fiber-optic TV service.
Chief Financial Officer Doreen Toben said Verizon didn't see a significant increase in its borrowing costs in the third quarter, despite the credit-market situation, because most of the company's loans have fixed rates. It was paying higher rates for a while on its short-term commercial paper but the effect was marginal.
Verizon wireless and At&t will have a tough time this year. There's just alot more places people will spend there money than on phone service. But none-the-less at&t and Verizon should make it out this year alot better than some companies.
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