Verizon Communications VZ, the nation's largest wireless carrier, Monday said its second-quarter profit fell 21% as cost-cutting in its wireline business failed to keep pace with falling revenues.
The results matched Wall Street expectations, and Verizon said demand for cellphones and its new home TV service were holding up well in the recession.
Verizon earned $1.48 billion, or 52 cents a share, in the three months ended June 30. That's down from $1.88 billion, or 66 cents a share, a year ago.
Excluding special items, mainly for job cuts, New York-based Verizon says it earned 63 cents a share, beating the average analyst forecast as polled by Reuters.
Revenue rose 11% to $26.86 billion, matching expectations. The purchase of wireless carrier Alltel in January was the major reason for the increase — without it, revenue would have risen 1.9%.
In pre-market trading, Verizon shares fell 25 cents, or 0.8%, to $31.25.
Verizon Wireless had already revealed how many subscribers it added in the quarter, saying on Friday that net additions were 1.1 million. That was also roughly in line with analyst expectations. It ended the quarter with 87.7 million customers, ahead of AT&T's 79.6 million.
AT&T added more subscribers in the quarter: a net of 1.37 million. The iPhone continued to make AT&T a first choice for those willing to spend a premium on wireless service, particularly as the carrier and partner Apple launched a new model in June.
Wireless is the main growth driver at Verizon Communications, but it doesn't fully own Verizon Wireless. Vodafone of Britain owns 45% of it, and gets a corresponding share of its profits, though all of Verizon Wireless' revenue is counted in Verizon Communications' results.
On the wireline side, which includes Verizon's local-phone operations, services for businesses and governments, and long-haul wholesale traffic, the operating margin decline to 4.8% from 8.8%. Verizon's costs were nearly the same as a year ago, while revenue fell 5.2%.
Most of that drop came from the enterprise and wholesale units, as businesses continued to pull back in the face of the recession.
Perhaps uniquely for a U.S. phone company, local consumer services are actually rising at Verizon despite massive losses of landlines as households opt for cable phone service or going wireless-only.
The increase is minor — 0.2% in the latest quarter — but it's a testament to Verizon's heavy investment in replacing its copper network with optical fiber, enabling it to offer cable-like TV service and ultrafast broadband.