Verizon (NYSE: VZ ) reported flat earnings today, along with the unsurprising disclosure that strong wireless revenues offset the lackluster landline business. Although Verizon's wireless success may be heartening, the telecom industry's tough climate is still apparent.
Today's press announcement, of course, emphasized the positive aspects in its headline, such as Verizon's 6.7% increase in overall sales to $18.2 billion and the 23% increase in wireless revenues alone. (In fact, Verizon Wireless contributed more than 40% of the company's total sales.) However, the company's third-quarter net income was flat, at $1.8 billion, or $0.64 per diluted share, after a $20 million, $0.01-per-share special item related to pension settlements.
Industrywide, stalwart telecom companies such as AT&T (NYSE: T ) are turning away from more traditional telecom offerings such as long distance. Verizon's press announcement played to its strengths and the evolution within the industry, stating, "We are steadily building momentum and accelerating our transformation into an industry-leading wireless and broadband company."
Despite the increasing migration of just about everyone and their brother to broadband, even that is questionable as a growth vehicle, though Verizon showed some positive aspects in that regard, with a 52% increase in DSL subscriptions since this time last year.
However, it's still impossible to ignore the fact that cable companies such as Comcast (Nasdaq: CMCSA ) and Cox (NYSE: COX ) have seen much success within their own high-speed Internet offerings. Meanwhile, Motley Fool Stock Advisor pick SBC Communications (NYSE: SBC ) has once again lowered the price for broadband in its bundled package, a move that should encourage lower prices industrywide.
Other notes of interest included Verizon Wireless's low churn rate of 1.5%. The company's free cash flow decreased a bit compared with this time last year; on the other hand, it reduced its debt burden by 10.7% to $40.5 billion.
Although some may argue that now's the time to pick the future winners in the telecom industry, it's clear that it's still experiencing a massive amount of turmoil and competition. With some of the positive aspects of today's quarterly results, it's arguable that Verizon is one of the stronger players in the beleaguered industry, with its hold on wireless customers and its high-speed Internet offerings. However, given the current climate, the industry is enough to make anybody a bit skittish.
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Alyce Lomax does not own shares of any of the companies mentioned. She gets her home broadband service from Verizon.
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