31st Oct 2006 07:01
Verizon Communications30 October 2006 Exhibit 99 NEWS RELEASE FOR IMMEDIATE RELEASE October 30, 2006 Media contacts: Peter Thonis 212-395-2355 [email protected] Bob Varettoni 908-559-6388 [email protected] Verizon Communications Posts Strong Third-Quarter Results as Organic Growth Initiatives Gain Momentum Another Quarter of Industry-Leading Profitable Growth at Verizon Wireless, Supported by Sales Volume Gains at Verizon Telecom and Verizon Business THIRD-QUARTER 2006 HIGHLIGHTS Consolidated • Diluted earnings per share (EPS) of 66 cents, or 68 cents per share before special items (non-GAAP measure) • Reported revenues of $23.3 billion, up 25.8 percent from third quarter 2005 Wireless • Verizon Wireless becomes the largest U.S. wireless company, based on revenues; total revenues up 18.2 percent from third quarter 2005; data revenues nearly double year-over-year; EBITDA margin (non-GAAP) of 45.0 percent • Total service ARPU and retail service ARPU up year-over-year and up from second quarter 2006; retail service ARPU of $51.21 • 1.9 million net customer additions; 56.7 million total customers, up 15.1 percent from third quarter 2005; 54.6 million retail (non-wholesale) customers • Continued industry-leading low churn rates (customer turnover); 1.24 percent total churn; 1.15 percent retail churn; 0.95 percent retail postpaid churn Verizon News Release, page 2 Wireline • 448,000 net new broadband connections at Verizon Telecom, including 147,000 FiOS Internet customers; 6.6 million total broadband connections, up 45.1 percent from third quarter 2005 • Data revenues of $4.1 billion, up 89.3 percent from third quarter 2005, including results from Verizon Business domestic and global operations • Verizon Business revenue trends continue to improve, with 1.7 percent sequential revenue growth; MCI merger synergies on target Notes: Prior-period amounts have been reclassified to reflect comparableresults. See the schedules accompanying this news release and www.verizon.com/investor for reconciliations to generally accepted accounting principles (GAAP)for the non-GAAP financial measures included in this announcement. Verizon's2006 reported results include revenues and expenses from the former MCI, Inc.,which merged with Verizon in January 2006. Discontinued operations include theoperations of Verizon Dominicana C. por A. and Telecomunicaciones de Puerto RicoInc. following second-quarter 2006 agreements to sell the businesses. NEW YORK - Verizon Communications Inc. (NYSE:VZ) today reported strongfinancial and operational results for the third quarter 2006, as sales volumesgained momentum in wireless, broadband and enterprise markets. Verizon reported quarterly earnings of $1.9 billion, or 66 cents per dilutedshare, compared with $1.9 billion, or 67 cents per share, in the third quarter2005. Reported earnings in the third quarter 2006 include a charge of 2 cents pershare for special items, including pension settlement charges and Verizon Centerrelocation and merger integration costs. Reported earnings in the third quarter2005 had included a net gain of 1 cent per share in special items, principallyfrom gains on a real estate sale and tax benefits, partially offset by assetimpairments. In the third quarter 2006, Verizon recognized an $85 millionfavorable tax benefit at Vodafone Omnitel. Before special items (non-GAAP), Verizon's third-quarter 2006 earnings were$2.0 billion, or 68 cents per share. This is an increase of 7.5 percent comparedwith earnings of $1.8 billion, or 66 cents per share, in the third quarter 2005. Consolidated third-quarter 2006 operating revenues were $23.3 billion, a 25.8percent increase compared with the third quarter 2005. Consolidated totaloperating expenses were $19.3 billion, a 29.0 percent increase compared with thethird quarter 2005. Verizon's third-quarter 2006 reported results includerevenues and expenses from the former MCI. Verizon News Release, page 3 Comparing third quarter 2006 with third quarter 2005 on a pro-forma (non-GAAP)basis: • Adjusted operating revenues increased 3.6 percent, supported by increasing sales volumes in markets that the company has been growing organically rather than through acquisition. • Adjusted cash expenses increased 4.4 percent. • Adjusted operating income increased 6.6 percent. Adjusted operating income margins, including the effects of net pension and OPEB(other post-retirement benefits) costs, were 17.3 percent in third quarter 2006,compared with 16.8 percent in third quarter 2005. Pro-forma, adjustedinformation presents the combined operating results of Verizon and the formerMCI on a comparable basis. Long-Term Shareholder Value "Verizon continues to win customers and market share for wireless, broadbandand enterprise services," said Ivan Seidenberg, Verizon chairman and CEO. "These organic growth initiatives gained momentum in the third quarter, and weare confident this growth is sustainable. We are building long-term shareholdervalue on a foundation of infrastructure and technology investment, supported byinnovative marketing and customer service initiatives. "Once again, Verizon Wireless has posted another industry-leading quarter ofprofitable growth, while our other network-based businesses continue toestablish new customer relationships. Verizon Telecom reported an excellentquarter in adding broadband and video customers. Verizon Business againdelivered sequential revenue growth as it focuses on increasing its penetrationof U.S.-based multi-national accounts, and the integration of the former MCI isproducing significant operational benefits and synergies that are on plan." Verizon News Release, page 4 Seidenberg added, "We are maintaining strong consolidated cash flows that wehave used in part to continue our share repurchase program in the third quarter." Verizon Wireless Leads Industry Verizon Wireless again delivered strong revenue growth, profitability, netcustomer additions and low churn that were significantly ahead of the industry. Verizon Wireless is now the largest U.S. wireless carrier in terms of revenue.The company is also the largest wireless data provider based on data revenue,and it has the most retail customers - that is, businesses and consumersdirectly served by Verizon Wireless and who buy Verizon Wireless-brandedservice, rather than customers of the company's resellers. Verizon Wireless revenues grew 18.2 percent year-over-year to $9.9 billion inthe third quarter 2006, driven by strong customer growth and demand for dataservices. This was the fourth consecutive quarter of 18 percent or betterrevenue growth. Service ARPU (average revenue per user) increased year-over-yearfor the second consecutive quarter, and wireless data revenues grew to 14.1percent of total wireless service revenues. Verizon Wireless operating income margin was 26.2 percent in the quarter, itshighest level ever, reflecting the company's ability to improve itsindustry-leading cost efficiency even as it added the most retail customers. Wireless EBITDA margin was 45.0 percent. (EBITDA - or earnings before interest,taxes, depreciation and amortization - is a non-GAAP measure that addsdepreciation and amortization to operating income; EBITDA margin is calculatedby dividing EBITDA by wireless service revenues.) Verizon News Release, page 5 Verizon Wireless added 1.9 million net customers in the third quarter 2006, fora total of 56.7 million customers nationwide, a 15.1 percent increase in totalcustomers from the end of the third quarter last year. During the past 12months, the company has added nearly 7.5 million net customers, more than anyother wireless carrier. All of the net additions in the third quarter and almostall net additions in the past 12 months were retail customers. Key to the company's strong net add performance was its continuedindustry-leading low churn level. For the third quarter 2006, total churn was1.24 percent, and churn among the company's retail postpaid customers - 93percent of all its customers - was 0.95 percent. Verizon Telecom Broadband Gains Verizon Telecom, which serves wireline residential and small-business customers,added 448,000 net broadband connections in the third quarter 2006. These resultsinclude new customers of both DSL and FiOS fiber-optic-based Internet accessservices. Over the past year, Verizon Telecom has added more than 2 million netnew DSL and FiOS Internet customers. Verizon Telecom now has 6.6 million totalbroadband connections, an increase of 45.1 percent compared with the thirdquarter 2005. FiOS Internet customers accounted for 147,000 of the net broadband connectionadditions in the third quarter and now total 522,000. In addition, VerizonTelecom had 118,000 FiOS TV customers at the end of the third quarter. In the consumer market, Verizon added 120,000 more net broadband and videocustomers during the third quarter than it lost in primary wireline voice accesslines. New broadband and video sales have more than made up for a reduction inprimary wireline voice access lines of customers who turned to wireless, cableor Internet protocol (IP) services. Primary residential access lines decreasedby 419,000 in the third quarter 2006, compared with the second quarter 2006,while Verizon added 539,000 residential broadband and video customers, includingcustomers with DIRECTV bundles, over the same period. Verizon News Release, page 6 At the end of the third quarter 2006, there were 46.0 million total domesticwireline access lines - which also include secondary residential lines, publictelephones, business lines and wholesale voice connections. This represents a7.5 percent decrease compared with the end of the third quarter 2005. Total wireline operating revenues, including Verizon Business, were $12.8billion in the third quarter 2006, an increase of 35.5 percent compared with thethird quarter 2005. On an adjusted basis (non-GAAP), total wireline operatingexpenses were $11.7 billion in the third quarter 2006, a 43.3 percent increasecompared with the third quarter 2005. On a pro-forma basis, wireline operating revenues decreased 4.7 percent,comparing third quarter 2006 with third quarter 2005, driven in part by acontinuation of the expected declines in former MCI operations serving massmarket (residential and small business) customers. Wireline revenues were upsequentially for the second quarter in a row, with third quarter 2006 revenuesup 0.1 percent over second quarter 2006. Also on a pro-forma basis, wireline cash expenses (total operating expenses lessdepreciation and amortization expense) were $9.3 billion in the third quarter2006, a decrease of 1.3 percent compared with the third quarter 2005. Verizon Business Continues to Build Momentum Verizon Business, which provides advanced communications and informationtechnology solutions to large business and government customers globally,continued to build momentum during the third quarter. Verizon News Release, page 7 Compared with the second quarter 2006, Verizon Business operating revenuesincreased 1.7 percent to $5.2 billion in the third quarter 2006. Pro-formarevenues from key strategic services, such as IP and managed services, grewnearly 25 percent in the third quarter 2006, compared with the third quarter2005. During the third quarter 2006, Verizon Business realized approximately $150million in incremental synergies from the integration of the former MCI. Thisbrings the year-to-date total to approximately $350 million - on track with thecompany's year-end target of $550 million. Verizon Business once again introduced a series of new products and capabilitiesfor its large business and government customers, and delivered a strongquarterly performance. New offerings during the quarter included expansion ofEthernet access to the Verizon Business Private IP network in six additionalEuropean countries and the addition of new IP-based capabilities for its ContactCenter Services and VoIP (voice over Internet protocol) portfolio to helpbusinesses enhance customer-service operations and leverage the benefits ofVoIP. Verizon Business also unveiled a new unified operations and securitycenter for its federal government customers. Cash Flows, Share Repurchases and Debt At the consolidated level, cash flows from continuing operations were $17.9billion in the first nine months of 2006, compared with $15.0 billion in thefirst nine months of 2005. Capital expenditures from continuing operations were$12.3 billion in the first nine months of 2006, including a $1.1 billionincrease in wireline investment primarily driven by the inclusion of MCI,compared with $11.4 billion over the same period in 2005. Verizon continues tomaintain its guidance for full-year 2006 capital expenditures of $17.0 billionto $17.4 billion. Verizon News Release, page 8 In the third quarter, Verizon repurchased approximately $350 million in shares,bringing total share repurchases to $1.35 billion over the first nine months of2006, toward a previously announced target of $1.5 billion by year-end. Verizon's total debt at the end of the third quarter 2006 was $41.7 billion,compared with $42.4 billion at the end of the second quarter 2006. Special Items and FAS 158 Special items in the third quarter 2006 included $64 million in after-taxcharges, or 2 cents per share, for pension settlement charges, MCI mergerintegration costs, and relocation and other costs related to establishing theVerizon Center in New Jersey. Special items in the third quarter 2005 included anet gain of 1 cent per share on the sale of a New York City office building andrelated relocation costs, tax benefits, asset impairments and other costs. The recently issued Financial Accounting Standard, Employers' Accounting forDefined Benefit Pension and Other Postretirement Plans (FAS 158), will beeffective at year-end 2006 and requires the recognition of the funded status ofdefined benefits plans as either an asset or liability on the balance sheet.Based on Verizon's current estimates, the company expects to decreaseshareowners' equity by approximately $10 billion post-tax as a result ofadopting this change. There is no impact on cash flows or earnings as a resultof adopting this change. Updates on Future Transactions Earlier this month, Verizon announced that its Board of Directors had approvedthe proposed spin-off of Information Services to its stockholders. The spin-offis expected to close on or about Nov. 17, resulting in a new public companycalled Idearc Inc. As a result of the spin-off, Verizon is expected to reduce its outstandingindebtedness by approximately $7 billion through a debt-for-debt exchange asdescribed in the Form 10 Verizon News Release, page 9 Registration Statement filed with the Securities and Exchange Commission.Verizon is also expected to receive approximately $2 billion in cash proceedsfrom additional borrowings by Idearc in connection with the spin-off. In April 2006, Verizon announced the execution of definitive agreements to sellits interests in Verizon Dominicana, Telecomunicaciones de Puerto Rico andCompania Anonima Nacional Telefonos de Venezuela. These asset sales areproceeding, and Verizon Dominicana and Telecomunicaciones de Puerto Rico arereported as discontinued operations. Business Highlights Following are third-quarter 2006 highlights for Verizon's Wireless, Wirelineand Information Services business segments. Wireless: • Continuing its focus on retail (non-wholesale) customers, Verizon Wireless added a record 2.0 million net retail customers during the third quarter. Based on publicly available information, the company has the largest retail customer base in the industry - 54.6 million retail customers of its 56.7 million total customers (which includes retail and wholesale). • Service revenues (which do not include taxes and regulatory fees) increased 16.5 percent to $8.5 billion for the third quarter 2006. Total service ARPU increased to $50.59, up 0.9 percent from the similar period in 2005 and up 1.8 percent from the prior quarter. Retail service ARPU was higher at $51.21 for the quarter, an increase of 1.2 percent over 2005. • Cost efficiency continued to lead the industry, as the company's cash expense per customer in the third quarter declined 5.0 percent year-over-year to $27.85. • Data services revenues, driven mainly by continued growth in business data revenues, contributed $1.2 billion, nearly double the amount for the same period a year ago. In the third quarter, data revenues were 14.1 percent of all service revenues, up from 8.4 percent in the third quarter of 2005. Data service ARPU continued to grow in the third quarter, increasing by 69 percent over the year-ago quarter. The company now has 30.9 million data customers - a 43 percent increase compared with third quarter 2005. • Continued expansion of the company's national 3G EV-DO high-speed data network and a leading lineup of business and consumer devices are propelling its growth in data services revenues. During the third quarter, Verizon Wireless extended its wireless broadband Verizon News Release, page 10 network reach to include new areas in Alabama, Arizona, Florida, Georgia, Idaho, Illinois, Kansas, Massachusetts, Nebraska, New Hampshire, New Mexico, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas and Vermont. At the end of the third quarter, 13.7 million customers had broadband-capable devices, including phones, PDAs, BlackBerries and laptop PC cards. • During the third quarter, the company announced supply agreements with Nortel and Motorola for CDMA 1xEV-DO Revision (Rev.) A technology, which will provide significantly faster data speeds for high-bandwidth wireless services such as VoIP and advanced multimedia applications. An agreement with Lucent Technologies was announced in June. • The company continued to expand its business customer base during the quarter and introduced new devices to enhance business connectivity, including the compact, plug-in Novatel ExpressCard for PCs; two Airlink Wireless rugged modems designed for always-on and location-based solutions; and the BlackBerry 8703e, which runs on the Verizon Wireless high-speed broadband network. • For consumers, the company launched the G'zOne Type-V, a rugged phone designed to stand up under the roughest conditions, and the MOTOKRZR K1m, the latest in a leading lineup of V CAST Music-enabled phones that allow customers to browse and download from the V CAST Music library of 1.4 million songs. The company now offers 10 music-capable phones, including the Chocolate TM, available exclusively from Verizon Wireless. • Get It Now services continued to hit milestones, for the first time in a single month topping 5 billion text messages and 100 million picture/ video messages exchanged, in September. For the quarter, Verizon Wireless customers exchanged a total of 14.4 billion text messages - a company and industry record - and nearly 290 million picture/video messages. Customers also completed more than 68 million downloads of games, ringtones, ringback tones and exclusive content. • Verizon Wireless continued to expand its distribution, adding post-paid service plans to its prepaid lineup at nearly 1,400 Target stores nationwide. • The company announced plans to add a new customer service center in Huntsville, Ala., in late 2007 to continue to deliver the best customer service in the industry to its growing customer base. The facility also will be home to a business sales team and a national service team for government customers. • During the quarter, the company again received third-party recognition for the reliability of its network. Verizon Wireless ranked highest nationally among the top five national wireless providers and scored significantly above the industry average in the J.D. Power and Associates Wireless Call Quality Performance Study Volume 2. In addition, for the sixth consecutive year, Verizon Wireless was included among Working Mother Magazine's 100 Best Companies for its commitment to helping parents balance work and family. (Working Mother also included Verizon Communications separately on this year's list.) Verizon News Release, page 11 Wireline: • Data revenues were $4.1 billion in the third quarter 2006, up 89.3 percent from the third quarter 2005 - a comparison favorably affected by the inclusion of MCI this year. Data revenues now make up 32 percent of Verizon's total wireline revenues. Verizon Telecom • FiOS data services are becoming increasingly available for sale in 16 states, as Verizon's FTTP (fiber to the premises) network passed a total of 5.3 million premises by the end of the third quarter and is on target to pass 6 million premises by year-end. • Penetration of FiOS Internet service now stands at 14 percent across all markets, with the service available for sale to 3.8 million premises as of the end of the third quarter, compared with 12 percent at the end of the second quarter 2006. • Penetration of FiOS TV service now stands at 10 percent across all markets, with the service available for sale to 1.2 million premises as of the end of the third quarter. As the deployment of FiOS TV ramped up and more premises became open for sale due to successful efforts to obtain cable franchises, the company added a net of 63,000 new FiOS TV customers in the third quarter 2006, compared with 35,000 in the second quarter 2006. • Churn among FiOS customers remains lower than 1.5 percent per month, and costs associated with customer churn continue to be lower than anticipated. Costs to pass a premises with fiber have declined to $845 in September 2006, already lower than the company's year-end target of $850. Costs to connect a premises to fiber declined to $900 in September, toward a year-end target of $880. As customer growth ramped up, earnings dilution from FiOS data and video deployment was 9 cents per share in the third quarter. The company increased the full-year 2006 estimate of this dilution to 31 cents to 32 cents per share, from 28 cents to 30 cents per share. • Complementing the FiOS TV rollout, Verizon now has 496,000 customers who receive a Verizon DIRECTV bundle, adding 64,000 net new customer additions in the quarter. Total net additions of 170,000 year-to-date reflect adjustments for amounts previously reported. • Approximately 7.5 million Verizon Freedom packages were in service to mass market customers by the end of the third quarter 2006, an increase of approximately 2.5 million since the end of the third quarter 2005. Verizon Freedom packages, which offer local wireline services with various combinations of long-distance and Internet access, are part of a bundling strategy designed to retain retail, primary access line customers. • Among legacy Verizon customers (that is, excluding former MCI mass market customers), the average monthly revenue per household in the third quarter 2006 was $53.06, an increase of more than 2 percent compared with both third quarter 2005 and second quarter 2006. Verizon News Release, page 12 Verizon Business • The Verizon Business IP Web Center continues to be recognized by leading industry authorities for the breadth and depth of its product portfolio, and its service received the prestigious 2006 INTERNET TELEPHONY TMC Labs Innovation Award. IP Web Center, a Web-based, complete hosted contact-center solution, allows companies to quickly start up or expand their customer communications operations in response to rapidly changing business plans or business continuity requirements. • In addition to a significant expansion of its Ethernet capabilities in Europe, Verizon Business offerings during the third quarter included further expansion of its managed hosting capabilities to support five of the world's most widely deployed computer operating systems, as well as the launch of a high-definition digital video transport service for broadcast and entertainment companies and other businesses in 13 Northeast and Mid-Atlantic states. • During the quarter, Verizon Business also opened its new Government Network Operations and Security Center, dedicated to supporting the unique security and operational requirements of its federal government customers. The center, located in Northern Virginia, will support the managed network services Verizon Business provides to nearly every federal government agency from the civilian, intelligence and defense communities. • Multinational companies including Hearst Corporation, First Data Corporation and Johnson Controls completed agreements with Verizon Business during the quarter for a wide range of communications services. Verizon Business recently completed the deployment of a 60-plus node Private IP multiprotocol label switching (MPLS) network and a global IP network connecting more than 30 sites for Hearst Corporation, a 119-year-old multimedia company with more than 20,000 employees worldwide. • Verizon Business executed significant extension agreements during the quarter with federal customers including the General Services Administration and the U.S. Postal Service. • Extended Stay Hotels recently increased the scope of its agreement with Verizon Business to provide Private IP service to CarrAmerica, a recently acquired affiliate. This is in addition to the La Quinta and MeriStar brands added earlier this year. By the end of 2006, Verizon will connect more than 1,200 sites. Dave & Buster's, a leading operator of upscale restaurant/entertainment complexes, completed a new agreement during the quarter with Verizon Business for Private IP, virtual private network (VPN), and data center and voice services. Verizon Business will help Dave & Buster's link all their locations nationwide in a secure, reliable advanced IP network environment. • Internationally, Verizon Business also signed significant new business during the quarter, including several notable deals for VoIP services. The Queen Elizabeth II Conference Centre in Westminster, London, an executive agency of the newly-created Department for Communities and Local Government, is one of the first U.K. government agencies to migrate its voice services to a VoIP system using IP Integrated Access. Separately, the U.K. National Verizon News Release, page 13 Health Service's Eastern Region Tariffs Consortium is conducting an IP Integrated Access VoIP trial in preparation for a full VoIP rollout across its sites. • Atos Worldline, a major European player in the processing of large volume electronic exchanges, signed a new contract with Verizon Business for Global Inbound Services to support customer communications. The London Stock Exchange has also extended its existing relationship with Verizon Business, signing a new four-year contract to manage its overall wide area network (WAN). Network reliability to support trading market data was cited as a key reason for contract renewal. • Personal computer manufacturer Acer Europe Services has also extended its relationship with Verizon Business, implementing Private IP in a two-year contract to link its European sites with its overall global network. Other customers that have extended their relationship with Verizon Business include Ubisoft Entertainment Inc., a computer and video game publisher, and Alliance Atlantis Communications Inc., a leading specialty broadcaster in Canada. Both customers use Verizon Internet bandwidth and co-location services. Information Services: Since the spin-off process described above is still ongoing, InformationServices results of operations, financial position and cash flows continue to bereported in continuing operations in the third quarter. • Information Services third-quarter operating revenues were $804 million compared with $857 million in the third quarter of 2005, a 6.2 percent decline, primarily driven by reductions in domestic print-advertising revenue and the impact of the sale of small international operations. • In the third quarter, Information Services' domestic online directory and search service, SuperPages.com, achieved revenue growth of 22.4 percent compared with the third quarter of 2005, and Internet yellow pages searches increased 84.5 percent over the same period. Verizon Communications Inc. (NYSE:VZ), a Dow 30 company, is a leader indelivering broadband and other wireline and wireless communication innovationsto mass market, business, government and wholesale customers. Verizon Wirelessoperates America's most reliable wireless network, serving nearly 57 millioncustomers nationwide. Verizon Business operates one of the most expansivewholly-owned global IP networks. Verizon Telecom is deploying the nation's mostadvanced fiber-optic network to deliver the benefits of convergedcommunications, information and entertainment services to customers. Based inNew York, Verizon has a diverse workforce of approximately 250,000 and generatesannual consolidated operating revenues of approximately $90 billion. For moreinformation, visit www.verizon.com. #### Verizon News Release, page 14 VERIZON'S ONLINE NEWS CENTER: Verizon news releases, executive speeches andbiographies, media contacts, high quality video and images, and otherinformation are available at Verizon's News Center on the World Wide Web atwww.verizon.com/news. To receive news releases by e-mail, visit the News Centerand register for customized automatic delivery of Verizon news releases. NOTE: This news release contains statements about expected future events andfinancial results that are forward-looking and subject to risks anduncertainties. For those statements, we claim the protection of the safe harborfor forward-looking statements contained in the Private Securities LitigationReform Act of 1995. The following important factors could affect future resultsand could cause those results to differ materially from those expressed in theforward-looking statements: materially adverse changes in economic and industryconditions and labor matters, including workforce levels and labor negotiations,and any resulting financial and/or operational impact, in the markets served byus or by companies in which we have substantial investments; material changes inavailable technology; technology substitution; an adverse change in the ratingsafforded our debt securities by nationally accredited ratings organizations; thefinal results of federal and state regulatory proceedings concerning ourprovision of retail and wholesale services and judicial review of those results;the effects of competition in our markets; the timing, scope and financialimpacts of our deployment of fiber-to-the-premises broadband technology; theability of Verizon Wireless to continue to obtain sufficient spectrum resources;changes in our accounting assumptions that regulatory agencies, including theSEC, may require or that result from changes in the accounting rules or theirapplication, which could result in an impact on earnings; the timing of theclosings of the sales of our Latin American and Caribbean properties; and theextent and timing of our ability to obtain revenue enhancements and cost savingsfollowing our business combination with MCI, Inc. Verizon Communications Inc. Consolidated Statements of Income (dollars in millions, except per share amounts) Unaudited 3 Mos. Ended 3 Mos. Ended % Change 9 Mos. Ended 9 Mos. Ended % Change 9/30/06 9/30/05 9/30/06 9/30/05 Operating Revenues $ 23,254 $ 18,486 25.8 $ 67,990 $ 54,221 25.4 Operating Expenses Cost of services and sales 8,982 6,361 41.2 26,349 18,390 43.3 Selling, general & administrative expense 6,720 5,195 29.4 19,587 15,382 27.3 Depreciation and amortization expense 3,628 3,433 5.7 10,947 10,219 7.1 Sales of businesses, net - - * - (530 ) (100.0 ) Total Operating Expenses 19,330 14,989 29.0 56,883 43,461 30.9 Operating Income 3,924 3,497 12.2 11,107 10,760 3.2 Equity in earnings of unconsolidated businesses 288 182 58.2 616 553 11.4 Other income and (expense), net 101 88 14.8 264 290 (9.0 )Interest expense (572 ) (525 ) 9.0 (1,798 ) (1,601 ) 12.3 Minority interest (1,088 ) (748 ) 45.5 (2,942 ) (2,069 ) 42.2 Income Before Provision for Income Taxes, Discontinued Operations and Cumulative Effect of Accounting Change 2,653 2,494 6.4 7,247 7,933 (8.6 ) Provision for income taxes (855 ) (702 ) 21.8 (2,421 ) (2,386 ) 1.5 Income Before Discontinued Operations and Cumulative Effect of Accounting Change 1,798 1,792 0.3 4,826 5,547 (13.0 ) Income from discontinued operations, net of tax (1) 124 77 61.0 381 192 98.4 Cumulative effect of accounting change, net of tax - - * (42 ) - * Net Income $ 1,922 $ 1,869 2.8 $ 5,165 $ 5,739 (10.0 ) Basic Earnings per Common Share (3) Income before discontinued operations and cumulative effect of accounting change $ .62 $ .65 (4.6 ) $ 1.66 $ 2.00 (17.0 ) Income from discontinued operations, net of tax .04 .03 33.3 .13 .07 85.7 Cumulative effect of accounting change, net of tax - - * (.01 ) - * Net income $ .66 $ .68 (2.9 ) $ 1.77 $ 2.07 (14.5 ) Weighted average number of common shares (in millions) 2,907 2,765 2,911 2,767 Diluted Earnings per Common Share (2) (3) Income before discontinued operations and cumulative effect of accounting change $ .62 $ .64 (3.1 ) $ 1.65 $ 1.98 (16.7 ) Income from discontinued operations, net of tax .04 .03 33.3 .13 .07 85.7 Cumulative effect of accounting change, net of tax - - * (.01 ) - * Net income $ .66 $ .67 (1.5 ) $ 1.76 $ 2.05 (14.1 ) Weighted average number of common shares-assuming dilution (in millions) 2,923 2,817 2,945 2,818 Footnotes: (1) Discontinued Operations includes our interests in Telecomunicaciones de Puerto Rico, Inc. and Verizon Dominicana, C. por A. (2) Diluted Earnings per Share includes (i) income related to share dilution (exchangeable equity interests and zero coupon convertible debt) of $4 million and $31 million for the third quarter and year-to-date 2006, respectively, and $15 million and $43 million for the third quarter and year-to-date 2005, respectively, and (ii) the dilutive effect of shares issuable under our stock-based compensation plans, exchangeable equity interests and zero coupon convertible debt, which represent the only potential dilution. The zero coupon debt was retired on May 15, 2006. The exchangeable equity interest was converted on August 15, 2006 by issuing 29.5 million Verizon shares. (3) EPS totals may not add due to rounding. * Not meaningful Verizon Communications Inc. Consolidated Statements of Income Before Special Items (dollars in millions, except per share amounts) Unaudited 3 Mos. Ended 3 Mos. Ended % Change 9 Mos. Ended 9 Mos. Ended % Change 9/30/06 9/30/05 9/30/06 9/30/05 Operating Revenues (1) Wireline $ 12,797 $ 9,445 35.5 $ 38,061 $ 28,257 34.7 Domestic Wireless 9,869 8,351 18.2 27,944 23,615 18.3 Information Services 804 857 (6.2 ) 2,443 2,608 (6.3 ) Other (216 ) (167 ) 29.3 (458 ) (461 ) (0.7 ) Total Operating Revenues 23,254 18,486 25.8 67,990 54,019 25.9 Operating Expenses (1) Cost of services and sales 8,976 6,361 41.1 26,343 18,317 43.8 Selling, general & administrative expense 6,624 5,134 29.0 18,969 15,270 24.2 Depreciation and amortization expense 3,628 3,433 5.7 10,947 10,219 7.1 Total Operating Expenses 19,228 14,928 28.8 56,259 43,806 28.4 Operating Income 4,026 3,558 13.2 11,731 10,213 14.9 Operating income impact of operations sold (1) - - * - 78 (100.0 ) Equity in earnings of unconsolidated businesses 288 182 58.2 616 553 11.4 Other income and (expense), net 101 98 3.1 264 300 (12.0 ) Interest expense (572 ) (525 ) 9.0 (1,772 ) (1,601 ) 10.7 Minority interest (1,088 ) (748 ) 45.5 (2,942 ) (2,069 ) 42.2 Income Before Provision for Income Taxes and Discontinued Operations 2,755 2,565 7.4 7,897 7,474 5.7 Provision for income taxes (893 ) (794 ) 12.5 (2,665 ) (2,294 ) 16.2 Income Before Discontinued Operations 1,862 1,771 5.1 5,232 5,180 1.0 Income from discontinued operations, net of tax (2) 124 77 61.0 381 192 98.4 Net Income Before Special Items $ 1,986 $ 1,848 7.5 $ 5,613 $ 5,372 4.5 Basic Earnings per Common Share (4) Income before discontinued operations $ .64 $ .64 * $ 1.80 $ 1.87 (3.7 ) Income from discontinued operations, net of tax .04 .03 33.3 .13 .07 85.7 Net income $ .68 $ .67 1.5 $ 1.93 $ 1.94 (0.5 ) Weighted average number of common shares (in millions) 2,907 2,765 2,911 2,767 Diluted Adjusted Earnings per Common Share (3) (4) Income before discontinued operations $ .64 $ .63 1.6 $ 1.79 $ 1.85 (3.2 ) Income from discontinued operations, net of tax .04 .03 33.3 .13 .07 85.7 Net income $ .68 $ .66 3.0 $ 1.92 $ 1.92 * Weighted average number of common shares-assuming dilution (in millions) 2,923 2,817 2,945 2,818 ________________ Footnotes: (1) Reclassifications of prior period amounts have been made, where appropriate, to reflect comparable operating results excluding primarily Wireline access lines sold, as follows: Revenues $ - $ - $ - $ 202 Expenses $ - $ - $ - $ 124 (2) Discontinued Operations includes our interests in Telecomunicaciones de Puerto Rico, Inc. and Verizon Dominicana, C. por A. (3) Diluted Earnings per Share includes (i) income related to share dilution (exchangeable equity interests and zero coupon convertible debt) of $4 million and $31 million for the third quarter and year-to-date 2006, respectively, and $15 million and $43 million for the third quarter and year-to-date 2005, respectively, and (ii) the dilutive effect of shares issuable under our stock-based compensation plans, exchangeable equity interests and zero coupon convertible debt, which represent the only potential dilution. The zero coupon debt was retired on May 15, 2006. The exchangeable equity interest was converted on August 15, 2006 by issuing 29.5 million Verizon shares. (4) EPS totals may not add due to rounding. * Not meaningful Verizon Communications Inc. Consolidated Statements of Income - Reconciliations (dollars in millions, except per share amounts) 3 Mos. Ended Special and Non-Recurring Items 3 Mos. Ended 9/30/06 9/30/06 Reported Before Special (GAAP) Items ________________________________________________________________Unaudited Merger Integration Verizon Center Severance, Costs Relocation, Pension and Benefits net Charges Operating $ 23,254 $ - $ - $ - $ 23,254 Revenues Operating Expenses Cost of 8,982 (6 ) - - 8,976 services and sales Selling, 6,720 (19 ) (48 ) (29 ) 6,624 general & administrative expense Depreciation 3,628 - - - 3,628 and amortization expense Total 19,330 (25 ) (48 ) (29 ) 19,228 Operating Expenses Operating 3,924 25 48 29 4,026 Income Equity in 288 - - - 288 earnings of unconsolidated businesses Other income 101 - - - 101 and (expense), net Interest (572 ) - - - (572 )expense Minority (1,088 ) - - - (1,088 )interest Income Before 2,653 25 48 29 2,755 Provision for Income Taxes and Discontinued Operations Provision for (855 ) (9 ) (17 ) (12 ) (893 )income taxes Income Before 1,798 16 31 17 1,862 Discontinued Operations Income from 124 - - - 124 discontinued operations, net of tax Net Income $ 1,922 $ 16 $ 31 $ 17 $ 1,986 Basic Earnings per Common Share (1) Income before $ .62 $ .01 $ .01 $ .01 $ .64 discontinued operations Income from .04 - - - .04 discontinued operations, net of tax Net income $ .66 $ .01 $ .01 $ .01 $ .68 Diluted Earnings per Common Share (1) Income before $ .62 $ .01 $ .01 $ .01 $ .64 discontinued operations Income from .04 - - - .04 discontinued operations, net of tax Net income $ .66 $ .01 $ .01 $ .01 $ .68 3 Mos. Ended Special and Non-Recurring Items 3 Mos. Ended 9/30/05 9/30/05 Reported Before Special (GAAP) Items _______________________________________________________________________Unaudited Verizon Center Lease Impairment Tax Benefits Tax on Relocation, and Other Repatriated Net Special Earnings Items Operating $ 18,486 $ - $ - $ - $ - $ 18,486 Revenues Operating Expenses Cost of 6,361 - - - - 6,361 services and sales Selling, 5,195 64 (125 ) - - 5,134 general & administrative expense Depreciation 3,433 - - - - 3,433 and amortization expense Sales of - - - - - - businesses, net Total 14,989 64 (125 ) - - 14,928 Operating Expenses Operating 3,497 (64 ) 125 - - 3,558 Income Equity in 182 - - - - 182 earnings of unconsolidated businesses Other income 88 - 10 - - 98 and (expense), net Interest (525 ) - - - - (525 )expense Minority (748 ) - - - - (748 )interest Income Before 2,494 (64 ) 135 - - 2,565 Provision for Income Taxes and Discontinued Operations Provision for (702 ) 27 (4 ) (94 ) (21 ) (794 )income taxes Income Before 1,792 (37 ) 131 (94 ) (21 ) 1,771 Discontinued Operations Income from 77 - - - - 77 discontinued operations, net of tax Net Income $ 1,869 $ (37 ) $ 131 $ (94 ) $ (21 ) $ 1,848 Basic Earnings per Common Share (1) Income before $ .65 $ (.01 ) $ .05 $ (.03 ) $ (.01 ) $ .64 discontinued operations Income from .03 - - - - .03 discontinued operations, net of tax Net income $ .68 $ (.01 ) $ .05 $ (.03 ) $ (.01 ) $ .67 Diluted Earnings per Common Share (1) Income before $ .64 $ (.01 ) $ .05 $ (.03 ) $ (.01 ) $ .63 discontinued operations Income from .03 - - - - .03 discontinued operations, net of tax Net income $ .67 $ (.01 ) $ .05 $ (.03 ) $ (.01 ) $ .66 Footnote: (1) EPS totals may not add due to rounding. Note: See www.verizon.com/investor for a reconciliation of other non-GAAPmeasures included in this Quarterly Bulletin. Verizon Communications Inc. Consolidated Statements of Income - Reconciliations (dollars in millions, except per share amounts) Special and Non-Recurring Items ___________________________________________________________________ 9 Mos. Impact of Severance, Ended 9 Mos. Ended Accounting Verizon Pension 9/30/06 9/30/06 Extingui- for Share Merger Center and Before Reported shment Based Integration Relocation, Benefits Special (GAAP) of Debt Payments Costs Net Charges ItemsUnaudited Operating $ 67,990 $ - $ - $ - $ - $ - $ 67,990 Revenues Operating Expenses Cost of 26,349 - - (6 ) - - 26,343 services and sales Selling, 19,587 - - (151 ) (138 ) (329 ) 18,969 general & administrative expense Depreciation 10,947 - - - - - 10,947 and amortization expense Total 56,883 - - (157 ) (138 ) (329 ) 56,259 Operating Expenses Operating 11,107 - - 157 138 329 11,731 Income Equity in 616 - - - - - 616 earnings of unconsolidated businesses Other income 264 - - - - - 264 and (expense), net Interest (1,798 ) 26 - - - - (1,772 )expense Minority (2,942 ) - - - - - (2,942 )interest Income Before 7,247 26 - 157 138 329 7,897 Provision for Income Taxes, Discontinued Operations and Cumulative Effect of Accounting Change Provision for (2,421 ) (10 ) - (58 ) (50 ) (126 ) (2,665 ) income taxes Income Before 4,826 16 - 99 88 203 5,232 Discontinued Operations and Cumulative Effect of Accounting Change Income from 381 - - - - - 381 discontinued operations, net of tax Cumulative (42 ) - 42 - - - - effect of accounting change, net of tax Net Income $ 5,165 $ 16 $ 42 $ 99 $ 88 $ 203 $ 5,613 Basic Earnings per Common Share (1) Income before $ 1.66 $ .01 $ - $ .03 $ .03 $ .07 $ 1.80 discontinued operations and cumulative effect of accounting change Income from .13 - - - - - .13 discontinued operations, net of tax Cumulative (.01 ) - .01 - - - - effect of accounting change, net of tax Net income $ 1.77 $ .01 $ .01 $ .03 $ .03 $ .07 $ 1.93 Diluted Earnings per Common Share (1) Income before $ 1.65 $ .01 $ - $ .03 $ .03 $ .07 $ 1.79 discontinued operations and cumulative effect of accounting change Income from .13 - - - - - .13 discontinued operations, net of tax Cumulative (.01 ) - .01 - - - - effect of accounting change, net of tax Net income $ 1.76 $ .01 $ .01 $ .03 $ .03 $ .07 $ 1.92 Special and Non-Recurring Items ____________________________________________________________________ Lease Impair- 9 Mos. EndedUnaudited 9 Mos. Ended Sales of Impact of Verizon ment Tax on 9/30/05 9/30/05 Busin- Operations Center and Other Repat- Before Reported esses, Sold Relocation, Special Tax riated Special (GAAP) Net Net Items Benefits Earnings Items Operating Revenues $ 54,221 $ - $ (202 ) $ - $ - $ - $ - $ 54,019 Operating Expenses Cost of services and 18,390 - (73 ) - - - - 18,317 sales Selling, general & 15,382 - (51 ) 64 (125 ) - - 15,270 administrative expense Depreciation and 10,219 - - - - - - 10,219 amortization expense Sales of businesses, (530 ) 530 - - - - - - net Total Operating 43,461 530 (124 ) 64 (125 ) - - 43,806 Expenses Operating Income 10,760 (530 ) (78 ) (64 ) 125 - - 10,213 Operating income impact of operations sold - - 78 - - - - 78 Equity in earnings of 553 - - - - - - 553 unconsolidated businesses Other income and 290 - - - 10 - - 300 (expense), net Interest expense (1,601 ) - - - - - - (1,601 )Minority interest (2,069 ) - - - - - - (2,069 ) Income Before Provision 7,933 (530 ) - (64 ) 135 - - 7,474 for Income Taxes and Discontinued Operations Provision for income (2,386 ) 194 - 27 (4 ) (336 ) 211 (2,294 )taxes Income Before 5,547 (336 ) - (37 ) 131 (336 ) 211 5,180 Discontinued Operations Income from 192 - - - - - - 192 discontinued operations, net of tax Net Income $ 5,739 $ (336 ) $ - $ (37 ) $ 131 $ (336 ) $ 211 $ 5,372 Basic Earnings per Common Share (1) Income before $ 2.00 $ (.12 ) $ - $ (.01 ) $ .05 $ (.12 ) $ .08 $ 1.87 discontinued operations Income from .07 - - - - - - .07 discontinued operations, net of tax Net income $ 2.07 $ (.12 ) $ - $ (.01 ) $ .05 $ (.12 ) $ .08 $ 1.94 Diluted Earnings per Common Share (1) Income before $ 1.98 $ (.12 ) $ - $ (.01 ) $ .05 $ (.12 ) $ .07 $ 1.85 discontinued operations Income from .07 - - - - - - .07 discontinued operations, net of tax Net income $ 2.05 $ (.12 ) $ - $ (.01 ) $ .05 $ (.12 ) $ .07 $ 1.92 Footnote: (1) EPS totals may not add due to rounding. Note: See www.verizon.com/investor for a reconciliation of other non-GAAPmeasures included in this Quarterly Bulletin. Verizon Communications Inc. Selected Financial and Operating Statistics (dollars in millions, except per share amounts) Unaudited 9/30/2006 9/30/2005 Debt to debt and shareowners' equity ratio-end 47.4 % 49.7 % of period Book value per common share $ 15.85 $ 14.19 Common shares outstanding (in millions) End of period 2,920 2,765 Total employees (1) 249,965 215,035 Unaudited 3 Mos. Ended 3 Mos. Ended 9 Mos. Ended 9 Mos. Ended 9/30/06 9/30/05 9/30/06 9/30/05 Capital expenditures (including capitalized software) Wireline $ 2,334 $ 2,172 $ 7,344 $ 6,216Domestic Wireless 1,623 1,623 4,801 4,962Information Services 14 20 40 53Other 36 10 133 132 Total $ 4,007 $ 3,825 $ 12,318 $ 11,363 Cash dividends $ .405 $ .405 $ 1.215 $ 1.215declared per common share Footnote: (1) Prior period has been reclassified to reflect comparable amounts. Verizon Communications Inc. Consolidated Balance Sheets (dollars in millions) Unaudited 9/30/06 12/31/05 $ Change Assets Current assets Cash and cash equivalents $ 1,846 $ 776 $ 1,070 Short-term investments 1,589 2,498 (909 ) Accounts receivable, net 10,834 8,784 2,050 Inventories 1,650 1,714 (64 ) Assets held for sale 3,597 3,336 261 Prepaid expenses and other 2,099 2,168 (69 ) Total current assets 21,615 19,276 2,339 Plant, property and equipment 201,967 188,278 13,689 Less accumulated depreciation 120,565 115,125 5,440 81,402 73,153 8,249 Investments in unconsolidated 4,478 4,604 (126 ) businesses Wireless licenses 48,318 47,781 537 Goodwill 5,709 392 5,317 Other intangible assets, net 5,220 4,193 1,027 Other assets 18,937 18,731 206 Total Assets $ 185,679 $ 168,130 $ 17,549 Liabilities and Shareowners' Investment Current liabilities Debt maturing within one year $ 11,529 $ 6,688 $ 4,841 Accounts payable and accrued 14,501 12,066 2,435 liabilities Liabilities related to assets held for 2,065 1,865 200 sale Other 7,218 5,551 1,667 Total current liabilities 35,313 26,170 9,143 Long-term debt 30,154 31,569 (1,415 ) Employee benefit obligations 20,231 18,198 2,033 Deferred income taxes 21,905 22,715 (810 ) Other liabilities 4,274 3,363 911 Minority interest 27,523 26,435 1,088 Shareowners' investment Common stock 297 277 20 Contributed capital 31,423 25,369 6,054 Reinvested earnings 17,471 15,905 1,566 Accumulated other comprehensive loss (1,516 ) (1,783 ) 267 Common stock in treasury, at cost (1,575 ) (353 ) (1,222 ) Deferred compensation - employee stock 179 265 (86 ) ownership plans and other Total shareowners' investment 46,279 39,680 6,599 Total Liabilities and Shareowners' $ 185,679 $ 168,130 $ 17,549 Investment Verizon Communications Inc. Condensed Consolidated Statements of Cash Flows (dollars in millions) Unaudited 9 Mos. Ended 9 Mos. Ended $ Change 9/30/06 9/30/05 Cash Flows From Operating Activities Net Income $ 5,165 $ 5,739 $ (574 ) Adjustments to reconcile net income to net cash provided by operating activities - continuing operations: Depreciation and amortization 10,947 10,219 728 expense Sales of businesses, net - (530 ) 530 Employee retirement benefits 1,500 1,231 269 Deferred income taxes (540 ) (945 ) 405 Provision for uncollectible 916 982 (66 ) accounts Equity in earnings of (616 ) (553 ) (63 ) unconsolidated businesses Cumulative effect of accounting 42 - 42 change, net of tax Changes in current assets and (1,601 ) (1,916 ) 315 liabilities, net of effects from acquisition/disposition of businesses Other, net 2,123 773 1,350 Net cash provided by operating 17,936 15,000 2,936 activities - continuing operations Net cash provided by operating 315 275 40 activities - discontinued operations Net cash provided by operating 18,251 15,275 2,976 activities Cash Flows From Investing Activities Capital expenditures (including (12,318 ) (11,363 ) (955 ) capitalized software) Acquisitions, net of cash 1,037 (4,630 ) 5,667 acquired, and investments Proceeds from disposition of - 1,326 (1,326 ) businesses Net change in short-term 1,521 938 583 investments Other, net 576 293 283 Net cash used in investing (9,184 ) (13,436 ) 4,252 activities - continuing operations Net cash used in investing (138 ) (189 ) 51 activities - discontinued operations Net cash used in investing (9,322 ) (13,625 ) 4,303 activities Cash Flows From Financing Activities Proceeds from long-term 3,958 1,486 2,472 borrowings Repayments of long-term (8,706 ) (2,371 ) (6,335 ) borrowings and capital lease obligations Increase in short-term 1,831 1,109 722 obligations, excluding current maturities Dividends paid (3,537 ) (3,308 ) (229 ) Proceeds from sale of common 115 37 78 stock Purchase of common stock for (1,348 ) (221 ) (1,127 ) treasury Other, net 5 30 (25 ) Net cash used in financing (7,682 ) (3,238 ) (4,444 ) activities - continuing operations Net cash used in financing (177 ) (86 ) (91 ) activities - discontinued operations Net cash used in financing (7,859 ) (3,324 ) (4,535 ) activities Increase (decrease) in cash and 1,070 (1,674 ) 2,744 cash equivalents Cash and cash equivalents, 776 2,290 (1,514 ) beginning of period Cash and cash equivalents, end $ 1,846 $ 616 $ 1,230 of period Verizon Communications Inc. Wireline - Selected Financial Results (dollars in millions) Unaudited 3 Mos. Ended 3 Mos. Ended % Change 9 Mos. Ended 9 Mos. Ended % Change 9/30/06 9/30/05 9/30/06 9/30/05 Wireline Operating Revenues Verizon Telecom Mass Markets $ 5,640 $ 5,145 9.6 $ 17,014 $ 15,376 10.7 Wholesale 2,104 2,284 (7.9 ) 6,262 6,807 (8.0 ) Other 581 627 (7.3 ) 1,828 1,885 (3.0 ) Verizon Business Enterprise 3,562 1,501 137.3 10,338 4,521 128.7 Business Wholesale 844 351 140.5 2,515 1,029 144.4 International 795 - * * 2,318 - * * and Other Eliminations (729 ) (463 ) 57.5 (2,214 ) (1,361 ) 62.7 Total $ 12,797 $ 9,445 35.5 $ 38,061 $ 28,257 34.7 Operating Revenues Operating Expenses Cost of 6,205 3,932 57.8 18,326 11,633 57.5 services and sales Selling, 3,093 2,016 53.4 9,142 6,288 45.4 general & administrative expense Depreciation 2,376 2,197 8.1 7,164 6,582 8.8 and amortization expense Total $ 11,674 8,145 43.3 $ 34,632 $ 24,503 41.3 Operating Expenses Operating $ 1,123 $ 1,300 (13.6 ) $ 3,429 $ 3,754 (8.7 ) Income Operating 8.8 % 13.8 % 9.0 % 13.3 % Income Margin Segment Income $ 393 $ 537 (26.8 ) $ 1,200 $ 1,500 (20.0 ) ** Not Meaningful Verizon Communications Inc. Wireline - Selected Operating Statistics Unaudited 9/30/ 9/30/ % Change 06 05 Switched access lines in service* (000) Residence 28,523 31,629 (9.8 ) Business 17,095 17,660 (3.2 ) Public 355 400 (11.3 ) Total 45,973 49,689 (7.5 ) Wholesale voice connections** (000) 3,621 5,841 (38.0 ) Broadband connections (000) 6,573 4,531 45.1 Unaudited 3 Mos. Ended 3 Mos. Ended % Change 9 Mos. Ended 9 Mos. Ended % Change 9/30/06 9/30/05 9/30/06 9/30/05 High capacity and digital data revenues ($ in millions)*** Data $ 3,814 $ 1,943 96.3 $ 11,092 $ 5,690 94.9transport Data 278 219 26.9 752 608 23.7solutions Total $ 4,092 $ 2,162 89.3 $ 11,844 $ 6,298 88.1revenues Footnotes: * Includes former MCI In-Franchise retail lines in 2006. ** Resale and UNE-P lines, including lines covered under commercial agreements. Wholesale voice connections in 2006 exclude in-region UNE-P lines purchased by former MCI entities as retail lines. *** High capacity and digital data revenues for the nine months ended September 30, 2006 exclude approximately $96 million, attributable to amounts earned by the former MCI prior to the completion of the merger with Verizon. The segment financial results above are adjusted to exclude the effects ofspecial and non-recurring items. The company's chief decision makers excludethese items in assessing business unit performance, primarily due to theirnon-operational nature. Intersegment transactions have not been eliminated. Certain reclassifications have been made, where appropriate, to reflectcomparable operating results. Verizon Communications Inc. Verizon Wireless - Selected Financial Results (dollars in millions) Unaudited 3 Mos. Ended 3 Mos. Ended % Change 9 Mos. Ended 9 Mos. Ended % Change 9/30/06 9/30/05 9/30/06 9/30/05 Revenues Service $ 8,469 $ 7,270 16.5 $ 24,114 $ 20,701 16.5revenues Equipment and 1,400 1,081 29.5 3,830 2,914 31.4other Total Revenues 9,869 8,351 18.2 27,944 23,615 18.3 Operating Expenses Cost of 2,930 2,519 16.3 8,347 6,899 21.0services and sales Selling, 3,132 2,814 11.3 8,837 8,051 9.8general & administrative expense Depreciation 1,220 1,199 1.8 3,684 3,524 4.5and amortization expense Total 7,282 6,532 11.5 20,868 18,474 13.0Operating Expenses Operating $ 2,587 $ 1,819 42.2 $ 7,076 $ 5,141 37.6Income Operating 26.2 % 21.8 % 25.3 % 21.8 % Income Margin Segment Income $ 804 $ 574 40.1 $ 2,164 $ 1,524 42.0 Verizon Communications Inc. Verizon Wireless - Selected Operating Statistics Unaudited 9/30/ 9/30/ % Change 06 05 Subscribers (000) 56,747 49,291 15.1Penetration 22.2 % 19.9 % Unaudited 3 Mos. Ended 3 Mos. Ended % Change 9 Mos. Ended 9 Mos. Ended % Change 9/30/06 9/30/05 9/30/06 9/30/05 Subscriber 1,912 1,918 (0.3 ) 5,410 5,475 (1.2 ) net adds in period (1) (000) Total 1.2 % 1.3 % 1.2 % 1.3 % churn rate, including prepaid Footnotes: The segment financial results above are adjusted to exclude the effects ofspecial and non-recurring items. The company's chief decision makers excludethese items in assessing business unit performance, primarily due to theirnon-operational nature. Intersegment transactions have not been eliminated. Certain reclassifications have been made, where appropriate, to reflectcomparable operating results. (1) Includes acquisition of 17,000 and 7,000 subscribers in the first and second quarters of 2006 respectively; and 32,000, 4,000, and 11,000 subscribers in the first, second, and third quarters of 2005, respectively. Verizon Communications Inc. Information Services - Selected Financial Results (dollars in millions) Unaudited 3 Mos. Ended 3 Mos. Ended % Change 9 Mos. Ended 9 Mos. Ended % Change 9/30/06 9/30/05 9/30/06 9/30/05 Operating $ 804 $ 857 (6.2 ) $ 2,443 $ 2,608 (6.3 ) Revenues Operating Expenses Cost of 131 141 (7.1 ) 420 444 (5.4 ) services and sales Selling, 278 252 10.3 812 826 (1.7 ) general & administrative expense Depreciation 22 23 (4.3 ) 67 69 (2.9 ) and amortization expense Total 431 416 3.6 1,299 1,339 (3.0 ) Operating Expenses Operating $ 373 $ 441 (15.4 ) $ 1,144 $ 1,269 (9.9 ) Income Operating 46.4 % 51.5 % 46.8 % 48.7 % Income Margin Segment Income $ 249 $ 279 (10.8 ) $ 728 $ 798 (8.8 ) Footnotes: The segment financial results above are adjusted to exclude the effects ofspecial and non-recurring items. The company's chief decision makers excludethese items in assessing business unit performance, primarily due to theirnon-operational nature. Intersegment transactions have not been eliminated. Certain reclassifications have been made, where appropriate, to reflectcomparable operating results. Verizon Communications Inc. Other Reconciliations (dollars in millions) Unaudited 3 Mos. Ended 9/30/06 EBITDA - Verizon Wireless Segment income: Wireline $ 393 Verizon Wireless 804 Information Services 249 Total segments 1,446 Corporate and other 476 Consolidated net income $ 1,922 Verizon Wireless EBITDA Segment income $ 804 Add/subtract non-operating items: Provision for income taxes 607 Minority interest 1,089 Interest expense 95 Other income/(expense), net - Equity in earnings of unconsolidated businesses (8 ) Operating income 2,587 Add depreciation and amortization expense 1,220 Verizon Wireless EBITDA $ 3,807 Verizon Wireless total revenues $ 9,869 Verizon Wireless service revenues $ 8,469 Verizon Wireless operating income margin 26.2 % Verizon Wireless EBITDA margin 45.0 % (dollars in millions) Unaudited 3 Mos. Ended 3 Mos. Ended 9/30/05 9/30/06 Domestic Wireless Cash Cost Per Customer Domestic Wireless Cost of Services and $ 2,519 $ 2,930 Sales Domestic Wireless Selling, General & 2,814 3,132 Administrative Expense Less Equipment and Other Revenue (1,081 ) (1,400 ) Cash Expense $ 4,252 $ 4,662 Cumulative average subscribers (millions) 145.04 167.39 Cash Expense Per Subscriber $ 29.32 $ 27.85 Verizon Communications Inc. Other Reconciliations Operating Income and Margin (dollars in millions) Unaudited TOTAL VERIZON - ADJUSTED 3 Mos. Ended 3 Mos. Ended 9/30/05 9/30/06 Reported Revenue $ 18,486 $ 23,254 Adjustments (see Consolidated Statements - - of Income - Reconciliations) Adjusted Revenue $ 18,486 $ 23,254 Pro forma adjustments (1) 3,968 - Pro forma Adjusted Revenue $ 22,454 $ 23,254 Reported Operating Income $ 3,497 $ 3,924 Adjustments (see Consolidated Statements 61 102 of Income - Reconciliations) Adjusted Operating Income $ 3,558 $ 4,026 Pro forma adjustments (1) 219 - Pro forma Adjusted Operating Income $ 3,777 $ 4,026 Reported Operating Income Margin 18.9 % 16.9 % Pro forma Adjusted Operating Income 16.8 % 17.3 % Margin Cash Expense Unaudited (dollars in millions) TOTAL VERIZON (Adjusted) 3 Mos. Ended 3 Mos. Ended 9/30/05 9/30/06 Reported Operating Expenses $ 14,989 $ 19,330 Less Adjustments (see Consolidated (61 ) (102 ) Statements of Income - Reconciliations) Less Depreciation and Amortization (3,433 ) (3,628 ) Cash Operating Expenses $ 11,495 $ 15,600 Pro forma adjustments (1) $ 3,454 $ - Pro forma Cash Operating Expenses $ 14,949 $ 15,600 (1) For the three months ended September 30, 2005, the unaudited pro forma adjusted information contains the actual combined operating results of Verizon and the former MCI, with the results prior to the acquisition date (January 6, 2006) adjusted to include the pro forma impact of: the elimination of transactions between Verizon and the former MCI; the adjustment of amortization of acquired intangible assets and depreciation of fixed assets based on the preliminary purchase price allocation; the elimination of merger expenses incurred by the former MCI; and the elimination of severance expense incurred by the former MCI. Verizon Communications Inc. Other Reconciliations (dollars in millions) Unaudited 3Q' Pro Forma 3Q' 06 Before Adjustments 06 Pro Forma Special Before Items Special Items Total Wireline Operating Revenues $ 12,797 $ - $ 12,797 (dollars in millions) Unaudited 3Q'05 Pro Forma 3Q'05 Pro Before Adjustments Forma Special (1) Before Items Special Items Total Wireline Operating Revenues $ 9,445 $ 3,982 $ 13,427 (1) For the three months ended September 30, 2005, the unaudited pro forma adjusted information contains the actual combined operating results of Verizon and the former MCI, with the results prior to the acquisition date (January 6, 2006) adjusted to include the pro forma impact of the elimination of transactions between Verizon and the former MCI. Verizon Communications Inc. Other Reconciliations Wireline Pro Forma Strategic Services Unaudited (dollars in millions) 3Q'06 Pro Forma 3Q'06 Before Special Adjustments Items Pro Forma Before Special Items Strategic Services Revenue (2) $ 1,053 $ - $ 1,053All Other Verizon Business 4,148 - 4,148Revenues Verizon Business Revenues $ 5,201 $ - $ 5,201 3Q'05 Pro Forma 3Q'05 Adjustments Before Special (1) Pro Forma Items Before Special Items Strategic Services Revenue (2) $ 138 $ 706 $ 844All Other Verizon Business 1,714 2,722 4,436Revenues Verizon Business Revenues $ 1,852 $ 3,428 $ 5,280 Cash Expense (dollars in millions) Unaudited Wireline (Adjusted) 3 Mos. Ended 3 Mos. Ended 9/30/05 9/30/06 Wireline Operating Expenses $ 8,145 $ 11,674 Less: Depreciation and (2,197 ) (2,376 ) Amortization Cash Operating Expenses $ 5,948 $ 9,298 Pro forma adjustments (1) $ 3,469 $ - Pro forma Cash Operating Expenses $ 9,417 $ 9,298 (1) For the three months ended September 30, 2005, the unaudited pro forma adjusted information contains the actual combined operating results of Verizon and the former MCI, with the results prior to the acquisition date (January 6, 2006) adjusted to include the pro forma impact of: the elimination of transactions between Verizon and the former MCI; the adjustment of amortization of acquired intangible assets and depreciation of fixed assets based on the preliminary purchase price allocation; the elimination of merger expenses incurred by the former MCI; and the elimination of severance expense incurred by the former MCI. (2) Private IP, IP VPN, Security, Managed Network Data, Hosting, Ethernet and Ring Services; excludes Dial-up (pro forma basis). This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
VZC.L