Verizon Communications Inc. — 2010 Form 10-K Summary
Business context and reporting period. Annual report for the fiscal year ended December 31, 2010, filed February 28, 2011. Verizon is a communications holding company with two primary segments: Domestic Wireless and Wireline. The filing incorporates the company’s 2010 Annual Report to Shareowners for detailed MD&A and financial statements; those detailed figures are not reproduced in the supplied text.
Key financial and operating metrics
| Metric | 2010 information in supplied filing text |
|---|---|
| Domestic Wireless revenue | $63.4 billion, approximately 60% of aggregate revenue |
| Wireline revenue | $41.2 billion, approximately 39% of aggregate revenue |
| Wireline revenue by business | Mass Markets $16.3 billion; Global Enterprise $15.7 billion; Global Wholesale $8.4 billion; Other $0.9 billion |
| Wireless customers | Approximately 94.1 million at year-end; network population coverage approximately 292 million |
| Capital assets | Gross plant, property and equipment investment of approximately $212 billion at year-end 2010, versus $230 billion in 2009, before accumulated depreciation |
| Profit, cash flow, margins, debt and liquidity | The supplied text does not provide clear consolidated values; the statements and MD&A are incorporated by reference |
Material changes and developments
- In July 2010, Verizon spun off local exchange and related landline operations in predominantly rural areas of 14 states; the subsidiary then merged with Frontier Communications. Verizon said the transaction sharpened its Mass Markets focus on FiOS.
- Verizon launched LTE service in 38 major metropolitan areas and more than 60 commercial airports by year-end 2010. The company expected to add 140 markets by the end of 2011 and cover virtually its existing 3G footprint by the end of 2013.
- The board authorized a new repurchase program of up to 100 million shares on February 3, 2011. No shares were repurchased in the fourth quarter of 2010.
- Verizon agreed in January 2011 to acquire Terremark Worldwide for $19 per share in cash, approximately $1.4 billion; Terremark had approximately $0.5 billion of debt at year-end. Closing was expected in the first quarter of 2011, subject to conditions including regulatory approval.
Outlook, risks and contingencies
- Management’s stated operating priorities include expanding LTE, growing wireless data and smartphone use, and advancing FiOS and enterprise IP, managed and cloud services. These are strategic expectations, not quantified financial guidance; no clear earnings or revenue guidance is provided in the supplied text.
- Key risks include intense competition and pricing pressure, rapid technology change, successful and timely LTE deployment, spectrum availability, reliance on key network and device suppliers, economic weakness, regulation (including new net-neutrality rules), network outages or security breaches, credit-market conditions, benefit-plan costs and litigation.
- Approximately 30% of employees were union-represented; many labor contracts were due to expire in 2011, creating negotiation and potential work-stoppage risk.
- A litigation trust sued Verizon and subsidiaries in September 2010 over the 2006 Idearc directories-business spin-off, seeking more than $9 billion. Verizon also disclosed an appeal pending in litigation concerning alleged government access to communications and records.
- The company reported approximately 194,400 employees and approximately 215,400 retirees participating in benefit plans, making pension and healthcare costs material sensitivities.
Important facts for investors to verify
- Review the incorporated 2010 Annual Report for consolidated revenue, net income, segment operating results, cash flows, capital spending, debt, liquidity, margins and year-over-year comparisons; the supplied text does not provide clear values for these.
- Assess the financial and accounting effects of the Frontier spin-off and compare reported periods on a consistent basis.
- Track LTE rollout, subscriber and data growth, required capital investment, spectrum capacity and returns on network spending.
- Monitor labor negotiations, the Terremark transaction and financing, and the outcome or exposure associated with the Idearc litigation.
- Note the quarterly 2010 dividends declared: $0.4750 in the first and second quarters and $0.4875 in the third and fourth quarters.