Business context and reporting period
Verizon Communications Inc. filed this Form 10-K for the fiscal year ended December 31, 2012; it is an annual filing, not a standalone quarterly report. Verizon operates through Verizon Wireless and Wireline and had approximately 183,400 employees. Verizon owns 55% of Verizon Wireless, with Vodafone owning 45%.
Financial and operating highlights
| Metric | 2012 information in the supplied filing text |
|---|---|
| Wireless revenue | Approximately $75.9 billion, about 66% of Verizon aggregate revenue. |
| Wireline revenue | $39.8 billion, about 34% of aggregate revenue. |
| Wireline revenue mix | Mass Markets $16.7 billion; Global Enterprise $15.3 billion; Global Wholesale $7.2 billion; Other $0.5 billion. |
| Wireless connections | 98.2 million retail connections at year-end; approximately 94% were postpaid. |
| Network and property | Gross investment in plant, property and equipment was approximately $210 billion at year-end, versus $216 billion in 2011. FiOS passed more than 17.6 million premises. |
| Dividend and repurchases | Fourth-quarter declared dividend was $0.515 per share, versus $0.50 in fourth-quarter 2011. No shares were repurchased in Q4; approximately 3.50 million had been repurchased under the authorization through February 15, 2013. |
The supplied text does not provide clear consolidated values for net income, operating profit, cash flow, margins, debt, or liquidity. The filing incorporates the relevant financial statements and management discussion from Verizon’s 2012 Annual Report to Shareowners, which are not included in the supplied text. The reported segment revenues imply aggregate revenue of approximately $115.7 billion, but a clear consolidated revenue figure is not provided here.
Material changes versus the prior comparable period
- Gross property and equipment investment declined from approximately $216 billion in 2011 to $210 billion in 2012; the mix shifted toward Wireless properties.
- The quarterly declared dividend rose to $0.515 from $0.50 in the fourth quarter of 2011.
- Verizon acquired HUGHES Telematics in 2012 and acquired AWS spectrum for an aggregate $3.9 billion at closing. It also completed spectrum license transactions involving Leap Wireless and T-Mobile.
- Verizon launched Share Everything plans in 2012; they represented approximately 23% of retail postpaid accounts at year-end.
Outlook, risks, contingencies, and unusual items
- Verizon expected to extend 4G LTE during 2013 to nearly its existing 3G footprint by year-end. It expected commercial Voice over LTE service by early 2014.
- In January 2013, Verizon agreed to sell certain 700 MHz licenses to AT&T for $1.9 billion plus a transfer of AWS licenses, and other licenses to an investment firm for $0.2 billion. The transactions were subject to regulatory approvals.
- Major stated risks include intense competition, economic weakness, technology shifts, supplier concentration, regulatory changes, cyberattacks, natural disasters, credit-market conditions, rising benefit costs, labor negotiations, and litigation.
- Two significant legal contingencies concern the Idearc spin-off litigation, seeking more than $9 billion, and the FairPoint-related litigation, seeking approximately $2 billion. The filing describes ongoing proceedings; the supplied text does not establish a final liability.
- Verizon identified pension and healthcare plan costs, network investment needs, and access to spectrum as important financial and operating considerations. The supplied text does not provide quantified guidance for earnings, cash flow, or capital spending.
Important facts for investors to verify
- Consolidated revenue, net income, cash flow, margins, debt, liquidity, capital expenditures, and segment year-over-year results in the incorporated financial statements and MD&A.
- Wireless and Wireline revenue and profitability trends, including subscriber growth, churn, and the economics of Share Everything plans.
- Funding needs and expected returns from LTE deployment, fiber investment, and spectrum transactions.
- Developments and potential exposure in the Idearc and FairPoint cases, along with regulatory and labor matters.
- Dividend sustainability and capital-allocation priorities, including debt reduction and the remaining share-repurchase authorization.