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News
Issue #2003 - 27 (October 2003)
(Updated Oct. 22, 2003)

INFRASTRUCTURE, PRODUCTS & SERVICES

Verizon to Shift More Spending to Wireless Data
Source: Reuters

NEW YORK, Oct 1 (Reuters) - Verizon Communications Inc., the largest U.S. telephone company, said on Wednesday it expects its 2004 capital spending to be the same as its 2003 budget, but it will reallocate money to invest in data, wireless and other growing markets.

Verizon expects its 2003 capital expenses to be about $12 billion to $12.5 billion, and that will remain unchanged in 2004, Verizon Vice Chairman Larry Babbio told investors at a Goldman Sachs communications conference in New York.

New York-based Verizon will trim investments in its traditional local telephone operations, which suffer from a drop in telephone lines and shrinking revenues due to competition and slack demand.

To offset declining local revenues, Verizon has slashed its administrative expenses, cut jobs and offered an early retirement package to managers. Babbio said there's still more cost-cutting to be done.

Last week, Verizon slashed its 2003 earnings forecast, citing costs of new labor pacts and weak demand. It reiterated that full-year revenues would be flat to up 2 percent.

"We do expect some margin compression as we look out to the future," Babbio said on Wednesday. "But I don't see a precipitous drop."

Verizon's profit margins have been in then range of 40.2 percent to 42.4 percent for the past six quarters.

ALL WIRED UP
Capital spending will shift to faster-growing segments of the business, such as data, wireless and corporate services. One major investment will be connecting high-speed fiber-optic cable directly to residential and small business customers.

Large businesses already have high-speed fiber links, but residential customers and smaller companies lack the large capacity lines to transmit video, entertainment and data services at the fastest speeds.

"We're willing to spend on fiber. Downstream its going to pay for itself" as customers buy extra services and send more traffic across its network, Babbio said.

"We have to come up with a content strategy, which is something we're been working on," he said.

But unlike other Baby Bells, such as Qwest Communications International Inc. and SBC Communications Inc., that recently forged marketing pacts with satellite broadcasters, Babbio said he feels no rush to add a video service to Verizon's product mix.

Verizon did not disclose its budget for the fiber-to-the-home project. It said it was in talks with communications equipment makers, but had not yet chosen a vendor.

Verizon said it would start its fiber-to-the-home project in markets where construction costs would be the lowest, and would initially target apartment buildings or other multiple-dwelling complexes rather than single family homes.

The company said it aims for the fiber links to reach 60 percent of its residential and small business revenue-base over the next five years.

MobileInfo Comments and Advisory: Better sooner than later. Carriers are realizing what we have said quite often.

Note: This news release may contain forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of Securities Exchange act of 1934 in USA. Similar provisions exist in other countries. There is no assurance that the stipulated plans of vendors will be implemented. MobileInfo does not warrant the authenticity of the information. Readers should take appropriate caution in developing plans utilizing these products, services and technology architectures.  All trademarks used in this summary are the property of their respective owners.


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