verizon wireless giant moving into content but high debtload

Accuracy score :
97%

Verizon Communications Inc. (Verizon)

 

Verizon is a holding company that, acting through its subsidiaries, is one of the world’s leading providers of communications, information and entertainment products and services to consumers, businesses and governmental agencies. It operates through Wireless and Wireline segments. The Wireless segment provides communications products and services including wireless voice and data services and equipment sales. The Wireline segment provides communications products and services including local exchange and long distance voice service, broadband video and data, network access and other services.

 

Verizon (ticker symbol: VZ) is listed on the New York Stock Exchange and the NASDAQ Global Select Market.

 

In January 2015, Verizon participated in an auction of 65 MHz of spectrum in the Advanced Wireless Services (AWS)-3 band, completed by the Federal Communications Commission (FCC) and  the Verizon was the high bidder on 181 spectrum licenses, for which Verizon paid cash of approximately $10.4 billion. The FCC granted Verizon these spectrum licenses in April 2015.

 

On February 5, 2015, Verizon announced that they have entered into a definitive agreement with Frontier Communications Corporation (Frontier) pursuant to which Verizon will sell its local exchange business and related landline activities in California, Florida and Texas, including Fios Internet and video customers, switched and special access lines and high-speed Internet service and long distance voice accounts in these three states for approximately $10.5 billion (approximately $7.5 billion net of income taxes).

 

On May 19, 2015, Verizon consummated a sale- leaseback transaction with a financial services firm for the buildings and real estate at our Basking Ridge, New Jersey location. Verizon received total gross proceeds of $0.7 billion resulting in a deferred gain of $0.4 billion, which will be amortized over the initial leaseback term of twenty years.

 

On June 23, 2015, Verizon completed the tender offer and merger, and AOL became a wholly-owned subsidiary of Verizon. The aggregate cash consideration paid by Verizon at the closing of these transactions was approximately $3.8 billion.

 

During March 2015, Verizon completed a transaction with American Tower Corporation (American Tower) pursuant to which American Tower acquired the exclusive rights to lease and operate approximately 11,300 of Verizon’s wireless towers for an upfront payment of $5.0 billion (the Tower Monetization Transaction) over an average term of approximately 28 years. As part of this transaction, Verizon sold 162 towers for $0.1 billion.

 

On February 21, 2014, Verizon completed the acquisition of Vodafone Group Plc’s (Vodafone) indirect 45% interest in Cellco Partnership d/b/a Verizon Wireless for aggregate consideration of approximately $130 billion (the Wireless Transaction). The consideration paid was primarily comprised of cash of approximately $58.89 billion and Verizon common stock with a value of approximately $61.3 billion.

 

 

 

Summary (from latest annual report 2015)

  • Market Capital: $221,006,486,033 (last share price is 52.050 USD. Numbers of shares outstanding at the end of 2015 was 4,242,374,240).
  • Total stockholders’ equity: $16,428,000,000 up by $4,130,000,000 or 34% from 2014 (2014: $12,298,000,000) primarily thanks to increase of net income attributable to Verizon by $8,254,000,000. Partially offsetting these increases was repurchased of shares of $5,134,000,000 (104,402 shares) under accelerated share repurchase (ASR).
  • Current liabilities $35,052,000,000 or 14% out of total liabilities and equity is up by $7,065,000,000, or 25% from 2014 (2014: $27,987,000,000)
  • Net sales $131,620,000,000 up by $4,541,000,000 or 3.6% from 2014 (2014: $127,079,000,000) was primarily due to higher equipment revenues in Wireless segment (primarily smartphones, under the Verizon device payment program), higher revenues as a result of the acquisition of AOL and higher Mass Markets revenues driven by Fios services at Wireline segment. Partially offsetting these increases were lower Service revenues at Wireless segment and lower Global Enterprise revenues at our Wireline segment.
  • Net income $17,879,000,000 up by $8,254,000,000 or 86% from 2014 (2014: $9,625,000,000). An increase of $11,030,000,000 was as a result of decrease of selling, general and administrative expense primarily due to non-operational credits: severance, pension and benefit credits, also contributing to this decrease was a decline in sales commission expense at Wireless segment, which was driven by an increase in activations under the Verizon device payment program. Such cost decline was partially offset by higher provision for income taxes (increase of $6,551,000,000 or 1.5 times comparing to 2014) was primarily due to the impact of higher income before income taxes due to severance, pension and benefit credits recorded in 2015 compared to severance, pension and benefit charges recorded in 2014, as well as tax benefits associated with the utilization of certain tax credits in 2014 in connection with the Omnitel Transaction.
  • Cash and cash equivalents of $4,470,000,000 down by $6,128,000,000 or -58% from 2014 (2014: $10,598,000,000).
  • $38,930,000,000 provided by operating activities: during 2015 increased by $8,299,000,000 primarily due to $5,900,000,000 of cash proceeds, net of remittances, related to the sale of wireless device installment receivables as well as $2,400,000,000 of cash proceeds received related to the Tower Monetization Transaction attributable to the portion of the towers for which the right-of-use has passed to the tower operator as well as an increase in earnings at our Wireless segment.
  • -$30,043,000,000 used in investing activities: increased by $14,187,000,000 primarily due to more investments by $9,500,000,000 in acquisitions of wireless licenses.
  • -$15,015,000,000 provided by (used in) financing activities: -$9,300,000,000 used for repayments of long-term borrowings and capital lease obligations, including the repayment of $6,500,000,000 of borrowings under a term loan agreement; -$8,500,000,000 used for dividend payments; -$5,000,000,000 payment for accelerated share repurchase agreement. These uses of cash were partially offset by proceeds from long-term borrowings of $6,700,000,000.

 

 

Verizon subsidiaries

Name, State of Incorporation / Organization

 

Verizon California Inc., California

Verizon Delaware LLC, Delaware

Verizon Florida LLC, Florida

Verizon Maryland LLC, Delaware

Verizon New England Inc., New York

Verizon New Jersey Inc., New Jersey

Verizon New York Inc., New York

Verizon Pennsylvania LLC, Delaware

GTE Southwest Incorporated    (d/b/a Verizon Southwest), Delaware

Verizon Virginia LLC, Virginia

Bell Atlantic Mobile Systems LLC, Delaware

Cellco Partnership    (d/b/a Verizon Wireless), Delaware

GTE Corporation, New York

GTE Wireless Incorporated, Delaware

MCI Communications Corporation, Delaware

Verizon Americas Inc., Delaware

Verizon Business Global LLC, Delaware

Cranberry Properties LLC, Delaware

 

 

 

 

Opinion about the company

Fundamentally, it is good company. Adjusted earnings per share (EPS) for 2015 were $3.99, up 19.1 percent over $3.35 in adjusted EPS in 2014. Total return to shareowners for the year was 3.5 percent, which reflects more than $13.5 billion in dividends and stock repurchases and exceeds the performance of the Dow Jones Industrial Average and the S&P 500 for 2015.