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8/1/2006
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Verizon's Earnings: Wireless Eats Traditional Telecom For Lunch

Businesses have been shifting to wireless, VoIP, and considerably more e-mail use, hurting Verizon's traditional base.

A look inside Verizon's second-quarter earnings released today demonstrates how the new model of wireless and IP communications continues to be both friend and foe to the telecom industry.

Local customers and enterprises have been shifting to wireless, voice over IP, and considerably more e-mail use, hurting the traditional base of local access subscribers. Verizon has lost 4.3 million of its overall switched access lines since the same period last year. That amounts to a 7.4% drop and is a faster decline than analysts had expected.

However, the major carriers have been seeing drops for the last few years and have compensated with wireless and IP-based offerings. Verizon's wireless growth under affiliate Verizon Wireless is booming. The company added 1.8 million wireless subscribers in the last quarter alone, bumping its total to 54.8 million.

Verizon's DSL subscriber base increased almost 48% in the last year to 6.1 million lines. Data revenues were up 89.8% year over year and Verizon's recently launched FiOS high-speed Internet and television service are linchpins of the company's future plans.

Overall, Verizon, the second-largest U.S. telecommunications carrier behind AT&T, saw profits drop 24% based largely on job cuts, the company's merger with MCI, and the expensive fiber-optic build-out that FiOS requires. The $1.61 billion gain in the second quarter this year compares with a profit of $2.11 billion last year.

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