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Wireless growth boosts Verizon's profit

/ Source: The Associated Press

Verizon Communications Inc.'s first-quarter earnings rose 9.8 percent as its wireless division attracted more customers than other carriers, the company said Monday.

The country's second-largest telecommunications company earned $1.64 billion, or 57 cents per share, in the quarter that ended March 31, compared with $1.50 billion, or 51 cents per share, a year ago.

Revenue rose 5.5 percent to $23.8 billion from $22.6 billion.

Excluding items, earnings were 61 cents per share, matching the average expected by analysts polled by Thomson Financial. Analysts had expected revenue of $23.86 billion.

"Verizon has weathered the current economic uncertainty with strong first-quarter results," said Chairman and Chief Executive Ivan Seidenberg.

Analysts have been looking to the telecommunications companies to hold up well as the economy slows. AT&T Inc., Verizon's largest rival, bore that out with an earnings report last week that showed little sign of trouble. On a conference call Monday, Verizon Chief Financial Officer Doreen Toben said there was no change in bad customer debt during the quarter.

Shares rose 76 cents, or 2 percent, to $37.80 at the open of trade Monday.

UBS analyst John Hodulik said wireless results where strong, while the landline business was somewhat lower than expected.

Verizon Wireless added 1.5 million subscribers, beating AT&T, which added 1.3 million in the quarter. However, its growth rate was down from 1.7 million in the same quarter last year. Verizon Wireless still trails AT&T in the total number of subscribers, at 67.2 million compared with 71.4 million.

Verizon Wireless started a minor price war for high-end cellular plans in February, introducing a $99.99 monthly plan with unlimited calls and no roaming fees. Other carriers quickly matched or undersold that plan, and stocks took a hit across the industry as investors feared for carrier margins.

But Verizon chief operating officer Denny Strigl said Monday that the plan was boosting results. Before the plan was introduced, 4 percent of new subscribers opted for plans that cost $99 or more. With the new plan, 13 percent were buying the $99 plan, he said.

Verizon Wireless paid $9.36 billion in government spectrum auction that ended in March for airwaves that it plans to use to expand its data services in 2009.

Verizon lost 8.2 percent of its land lines from last year, ending with 40.5 million. Broadband connections were up 14.9 percent to 8.5 million, but total operating revenue in the segment, which includes business services, declined 1.4 percent to $12.3 billion.

Verizon added 263,000 customers to its fiber-optic TV service in the quarter, for a total of 1.2 million. The service is Verizon's way of tackling the threat from cable companies that are siphoning off voice customers.

Verizon laid off 6,500 people from its landline division last year to counter shrinking operations.

"We expect this trend to continue with ongoing reductions through the year," CFO Toben said.

At the end of the quarter, Verizon closed on the sale of about 1.6 million telephone lines and 230,000 high-speed Internet customers in Maine, New Hampshire and Vermont to North Carolina-based FairPoint Communications Inc.