With
the fresh wave of proposed mergers and acquisitions in communications,
we have seen a pullback in telecom stocks in the early months
of 2005, as investors are understandably sorting through the
implications of these transactions. Clearly, it is up to us
to demonstrate, as we have in the past, that we have the strength
and the strategies to navigate through this volatile period
and emerge as one of the winners in this still-restructuring
industry. We will not be satisfied – nor, I am sure,
will our investors – until our stock price consistently
reflects our position as the preeminent company in our industry.
For all the changes in the industry, we are confident in
our future. One sign of that confidence is that our Board
of Directors voted on March 4, 2005 to increase our quarterly
dividend by 2 cents per share. On an annual basis, this represents
a 5.2 percent increase, from $1.54 to $1.62 per share. What
this increase says is that our businesses are generating sufficient
cash flow to both reward shareowners and invest in the technologies
that will make Verizon more competitive and more valuable
as the communications transformation unfolds.
2004 Operating Results
As you will see throughout this report, we made good progress
in 2004 toward implementing our vision and making its benefits
tangible for customers.
Verizon Wireless continues to be the flagship company in
the industry, delivering our strongest year ever. Our commitment
to network quality and customer service has made us the industry
leader in customer growth, loyalty and profitability. Data
revenues exceed $1 billion a year and, as we expand our wide-area
wireless broadband network, we will offer customers a range
of new services, including high-quality video, 3-D games,
music and remote access.
Domestic Telecom is also focused on operating excellence
and growth through innovation. While revenues from the traditional
voice business continued to decline, we saw some stabilization
as the year went on and held operating income margins steady.
Telecom also performed strongly in the growth areas of DSL
and high-speed data services for business. We gained share
in the large-business market, and in 2005 we are looking to
make a strong business even stronger through our acquisition
of MCI. We are deploying a high-capacity fiber network that
will deliver a host of next-generation services, including
super-fast Internet access and HDTV-quality video. We believe
this strategy will enable us to leapfrog the competition and
make us the leader in the broadband marketplace of tomorrow.
Our Information Services unit is also transforming, now offering
yellow pages and search services in print, over the Internet
and on cell phones. With our traditional yellow pages directories
competing with a wider variety of media, we are focused on
running an efficient business, growing in new geographic areas
and expanding in new electronic markets for searching, shopping
and information. Information Services contributes approximately
$1 billion in segment income and very healthy operating income
margins.
Verizon International performed well in 2004. We divested
certain assets, principally in Canada, to focus our energies
on the wireline and wireless markets our affiliates serve
in the Caribbean and Latin America. Our international businesses
contributed $1.2 billion in segment income in 2004.
Our strong operating performance shows that it really is
possible to deliver great results today while leading for
tomorrow.
Looking Ahead
As we look ahead at 2005, the restructuring of the communications
industry has entered a new phase. At Verizon, we have announced
our intention to acquire MCI in order to gain sufficient scale
and presence to be a major supplier to national and global
enterprises.
We see the MCI acquisition as one more step on the path to
sustainable industry leadership. Over the years, we have shown
that we know how to use transactions like this to create value
and improve our competitive position. You can rest assured
that we will approach this with the same focus and accountability
for results we have demonstrated in the past.
For all the changes in our industry, there is one thing that
doesn’t change, and that’s the commitment of our
people. For that, I am grateful to the thousands of dedicated
Verizon employees who constantly find new ways to serve customers
– whether it’s delivering the top wireless service
in the industry, deploying the country’s fastest fiber-optic
network, or working day and night so we can say to a hurricane
victim in Florida, “Your service is restored.”
I also want to thank our Board of Directors for their guidance
and support as we steer our company through the convulsive
changes in our industry.
The more we accomplish, the more we know what still needs
to be done. The people of Verizon have a positive and exciting
vision of where we’re going. We are making the investments
and delivering the innovations that will put us on the upside
of industry change. We will continue to conduct business with
the highest ethical standards and live up to our legacy of
contributing to the well-being of communities all over the
country. And through it all, we will continue to step up to
the challenge of doing what leaders do: use periods of significant
change to reinvent their business and redefine the industry.
Ivan G. Seidenberg
Chairman and Chief Executive Officer
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