updated 1/27/2005 11:33:08 AM ET 2005-01-27T16:33:08

Verizon Wireless added 1.7 million new subscribers in another powerful quarter that narrowed the lead of a newly enlarged Cingular Wireless, helping boost parent Verizon Communications Inc. to a $1.8 billion profit.

Verizon also indicated Thursday in its quarterly update that it may step up efforts to sell swaths of its local telephone network _ a move that would both raise money for a costly rewiring of that network with speedy fiber-optic cables and reduce the magnitude of that multibillion-dollar endeavor.

Up to 14 million of the company's nearly 54 million residential lines could be sold or spun off in less densely populated markets or states where the company deems the regulatory climate unfavorable.

"It's clearly not our intention to say we intend to divest a third of our local access lines," vice chairman Lawrence T. Babbio Jr. told analysts at a meeting in New York. But, he noted, "There are some states where frankly we are just not growing the way we should. We are not generating the cash the way we should.... And if we have a state like that, then I think we should minimize our exposure to that.

For the three months ending Sept. 30, the company earned 64 cents per share, topping most Wall Street forecasts. In the same quarter last year, Verizon earned $1.79 billion, which also worked out to 64 cents per share.

Third-quarter revenues totaled $18.2 billion, up 6.7 percent compared with $17.1 billion a year earlier, as growth in wireless helped offset the ongoing decline in the traditional wired phone business.

Verizon Wireless, which is 45 percent owned by Vodafone PLC of Britain, accounted for 40 percent of the revenue total with sales of $7.3 billion, up 23 percent from last year's third-quarter tally of $5.9 billion.

By contrast, domestic telephone revenues slipped 2.1 percent to $9.7 billion compared with a year earlier.

Still, that marked a slight gain compared with the second quarter of 2004 as Verizon began reaping the benefits of a sudden shift in the regulatory and competitive backdrop.

In July, AT&T Corp. and MCI Corp. began withdrawing from the residential phone market after a court ruling threw out rules which made it cheaper for those companies to sell local phone service by leasing residential lines from Verizon and other Bells at government-set rates.

After losing millions of customers in recent years, the number of lines which Verizon was leasing to rivals steadied at 6.66 million by the end of September, only about 65,000 more than at the end of June.

In May, Verizon agreed to sell its Hawaiian local phone operations for $1.65 billion to the Carlyle Group. Earlier this month, the company suspended talks with potential buyers for its local operations in upstate New York.

Babbio said money generated from another sale or possible spinoff of local lines "would be good cash to put back into the fiber-to-the-premises program."

That ambitious plan, which envisions replacing all the copper wires running underground and on telephone poles all the way into every customer's house, is budgeted to cost $800 million in 2004 to reach the first 1 million homes.

With the net gain of 1.7 million cell phone customers, Verizon Wireless finished the quarter with 42.1 million subscribers. That's about 4 million shy of Cingular Wireless, the freshly minted leader in subscribers courtesy of a $41 billion purchase of AT&T Wireless Services Inc. completed on Tuesday.

Verizon Wireless also continued to outperform its larger rival on various fronts, including customer retention. Verizon lost only 1.5 percent of its cell subscribers per month during the third quarter, vs. a churn rate of 2.8 percent for Cingular and 3.7 percent for AT&T Wireless. Average monthly service revenue per customer increased 3.1 percent year-over-year to $51.58.

Officials said about 75,000 customers have now signed up for high-speed wireless Internet service, the first such update since the launch late last year in Washington D.C. and San Diego. The $80-a-month service was introduced in 11 more markets just before the close of the quarter, so most of the subscribers are in Washington.

For the first nine months of 2004, net profits totaled $4.8 billion, or $1.72 per share, on revenues of $53 billion. In the same period last year, Verizon earned $4.5 billion, or $1.63 per share, on revenues of $50.3 billion.

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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