Verizon

Prepared by – Vikram Mohan

Brief Overview of the Company:

Verizon Communications Inc., based in New York and incorporated in Delaware, was
formed on June 30, 2000, with the merger of Bell Atlantic Corp. and GTE Corp.

Verizon began trading on the New York Stock Exchange (NYSE) under the VZ symbol
on Monday, July 3, 2000.
Key Facts

- Dow 30 company
- 59 million wireless customers
- 45 million wire line access lines
- Serving 94 percent of Fortune 500 companies
- 242,000 employees
- Over 2,200 Verizon Wireless retail stores across the country
- Employees in over 300 Verizon Business offices in 75 countries across six continents
- First company to provide fibre-based digital TV to the mass market
- First company to provide wide-area wireless broadband service
- First commercial provider of Internet access

Business Solutions:
Verizon has two major segments that it operates as business units and they are organized by
products and services. These BU’s are,
- Wireline
o Telecom (Verizon Telecom)
o Business
- Domestic Wireless

Verizon Telecom consists of the operations of Verizon Telecom, a provider of telephone

services, including voice, broadband, data, network access, long distance, video, and
other services to consumer and small business customers and carriers.
Verizon Business is a global IP footprint that mainly caters to Fortune 500 companies (97
percent of them) and over 130,000 customers.

The domestic wireless business, operating as Verizon Wireless, provides wireless voice
and data products and services across the United States using one of the most extensive
wireless networks.

Major Customers:

Mainly caters to residential customers with a footprint over the United States of America.

Major Events in the company (M&A etc.):

- GTE Merger
o Bell Atlantic acquired GTE on June 30, 2000
o Changed its name to Verizon Communications, Inc.
o It was among the largest mergers in United States business history
o Result of a definitive merger agreement, dated July 27, 1998, between Bell
Atlantic, based in New York City since the merger with NYNEX in 1996,
and GTE
o Price at more than $52 billion
o September 21, 1999
 Bell Atlantic and UK-based Vodafone AirTouch Plc (now
Vodafone Group Plc) announced that they had agreed to create a
new wireless business with a national footprint, a single brand and
a common digital technology
 Began operations as Verizon Wireless on April 4, 2000
o This merger helped it expand user base and cater to what it called
secondary markets (in US) by acquisition of BE’s clients
- MCI acquisition
o February 14, 2005
 Verizon agreed to acquire MCI, formerly WorldCom
 SBC Communications agreed to acquire AT&T just a few weeks
earlier
 Benefited Verizon by including economies of scale derived from a
potential productivity boost to be achieved via the elimination of
thousands of jobs at the combined company
 Access to the large base of business customers currently served by
MCI
 Real benefit to Verizon was the acquisition of long-haul lines
• Verizon no longer had to pay royalties to other providers
when calls had to be routed outside its coverage footprint
• This was the key to Verizon’s long term market
positioning strategy
 Verizon, with MCI, was the largest telecommunications
company in the United States based on sales of $75.11 billion,
profits of $7.4 billion and assets of $168.13 billion
Financials:

Selected financial data

(dollars in milions, except per share amounts)

2006 2005 2004 2003 2002

Results of Operations
Operating revenues $88,144 $69,518 $65,751 $61,754 $60,907
Operating income 13,373 12,581 10,870 5,312 12,386
Income before discontinued operations
and cumulative effect of accounting change 5,480 6,027 5,899 2,168 3,016
Per common share - basic 1.88 2.18 2.13 .79 1.11
Per common share - diluted 1.88 2.16 2.11 .79 1.11
Net income 6,197 7,397 7,831 3,077 4,079
Net income available to common shareowners 6,197 7,397 7,831 3,077 4,079
Per common share - basic 2.13 2.67 2.83 1.12 1.49
Per common share - diluted 2.12 2.65 2.79 1.12 1.49
Cash dividends declared per common share 1.62 1.62 1.54 1.54 1.54

Financial Position
Total assets $188,804 $168,130 $165,958 $165,968 $167,468
Long-term debt 28,646 31,569 34,970 38,609 43,066
Employee benefit obligations 30,779 17,693 16,796 15,726 14,484
Minority interest 28,337 26,433 24,709 24,023 23,749
Shareowners' investment 48,535 39,680 37,560 33,466 32,616
Stock Performance Graph

Comparison of Five-Year Total Return Among Verizon, S&P 500 Telecom Services Index
and S&P 500 Stock Index
 Data Points in Dollars*
At December 31,

2001
2002
2003
2004
2005
2006

Verizon
100.0
84.9
80.3
96.5
75.2
101.1

S&P 500
100.0
77.9
100.2
111.1
116.6
135.0

S&P 500 Telecom Services

100.0
65.9
70.7
84.7
80.2
109.5

• Assumes $100 invested on December 31, 2001

• The graph compares the cumulative total returns of Verizon, the S&P 500
Telecommunications Services Index, and the S&P 500 Stock Index over a five-
year period.

• It assumes $100 was invested on December 31, 2001, with dividends reinvested.
Performance Summary,
Sources of Revenue:

Revenue contribution from the various BU’s can be shown as,

Wireline

Verizon owns and operates one of the most expansive end-to-end global IP networks
providing access to over 150 countries worldwide and next-generation IP network
services to medium and large businesses and government customers.

Verizon Telecom

Financial 2005 2006

 (Dollars in Millions)
Revenues 31,694 32,938

Operations As of 06/30/07
States w/Wireline Presence 28 + DC
Access Lines (000) 43,288
Broadband Connections (000) 7,686
Video Subscribers* 1,258
* includes both FiOS and DirecTV customers

Verizon Business

Financial 2005 2006

(Dollars in Millions)
Revenues 7,771 20,678
Operations As of 06/30/07
Cities 2,700+
Countries 150
POPs 4,500+
Customer Relationships 130,000+

Domestic Wireless

Verizon Wireless owns and operates America’s most reliable wireless network, serving
more than 62 million voice and data customers nationwide. Leveraging its greatest asset -
its network - Verizon Wireless continues to lead the industry by offering the highest
quality products and services while introducing innovative technology solutions.

The domestic wireless business, operating as Verizon Wireless, provides wireless voice
and data products and services across the United States using one of the most extensive
wireless networks.

Financial 2005 2006

(Dollars in Millions)
Revenues 32,301 38,043

Operations As of 06/30/07
Customers (000) 62,054
Penetration 23.8%
Customer Net Adds for current period (000) 1,338
Total churn, including prepaid 1.3%

Competitors:

Cellular service

- Alltel
- AT&T
- MetroPCS
- Sprint Nextel
- T-Mobile

Broadband

- AT&T
- Cablevision
- Comcast
- Embarq
- Qwest
- RCN
- Time Warner Cable
- Insight Communications
Television

- Comcast
- DirecTV
- Time Warner Cable
- Dish Network
- Charter Communications
- Cox Communications
- Cablevision
- RCN
- Insight Communications

Company Strategy:

- Continual restructuring of assets to focus on broadband, wireless and entertainment

- Dissolving investments in Puerto Rica and Venezuela as well as access lines in Maine,
Vermont and New Hampshire
o Generate cash and strengthen strategic focus
- Expect to invest $17.5 – 17.9 billion in 2007 to increase coverage, reliability and speed of
wireless, broadband and global IP networks
- Introducing bundled services that give customer convenience of a single source and
single bill
o Have one of first mover advantage in introducing service and communication and
delivering them to any screen the customer wants
- Working with a wide variety of partners to deliver their content across their three
broadband networks
- Using scale and structure to drive profits as well as revenues
Summary - Take aways:
A business model based on superior networks, customer loyalty and efficiency that leads to year
on year of margin leadership.