Verizon's second quarter report, 2004 -- A new Comedy? The joke is on us.

[David Farber <dave () farber net>]

Begin forwarded message:

From: Bruce Kushnick <bruce () newnetworks com>
Date: September 10, 2004 8:24:18 AM EDT
To: David Farber <dave () farber net>
Subject: Verizon's second quarter report, 2004 -- A new Comedy? The 
joke is on us.

It's the end of the summer and for light summer reading I decided to 
pick up
the Verizon second quarter report for 2004...

And boy, do I feel sorry for these guys....They have it sooo rough and 
are
losing lines and...Or are they?  So, let's see,

First, the company keeps complaining that they are losing lines. -- 
Well,
no,
that ain't true.

"Voice-grade equivalents (switched access lines and data circuits) grew 
3.2%
in the six months ended June 30, 2004, compared to the similar period in
2003, as customers chose more high-capacity digital services. We added
625,000 new DSL lines in the six months ended June 30, 2004, including
280,000 in the second quarter, for a total of 2.9 million lines at June 
30,
2004, representing a 52.5% increase from a year ago."

Remember, DSL replaces the second line anyway -- so who cares about
copper wire numbers? And adding long distance as well to every line
is just more revenue.

"As of June 30, 2004, approximately 50% of Verizon's residential 
customers
have
purchased local services in combination with either Verizon long 
distance or
Verizon DSL, or both."

"We added 632,000 long distance lines in the second quarter of 2004 and
1,470,000 long distance  lines in the six months ended June 30, 2004, 
for a
total
of 16.8 million long distance lines nationwide, representing a 21.4%
increase in
long distance lines from a year ago."

Lines going down? Well, I guess at least gullible reporters and 
regulators
still buy that story.

And if you need more money and don't want to pay taxes you can simply 
take
large tax deductions by moving around your numbers. For example, the
directory business could save a few billion in 2003.

"During 2003, we changed our method for recognizing revenues and 
expenses in
our directory business from the publication-date method to the 
amortization
method. ...The cumulative effect of the accounting change was a one-time
charge of $2,697 million ($1,647 million after-tax)."

Or better yet, let's write-off billions of dollars of equipment -- and 
keep
charging the competitors retail rates.

"We adopted the provisions of SFAS No. 143, "Accounting for Asset 
Retirement
Obligations" on January 1, 2003.... Consequently, in connection with the
initial adoption
of SFAS No. 143 we reversed accrued costs of removal in excess of 
salvage
from
our accumulated depreciation accounts for these assets.  The adjustment 
was
recorded as a
cumulative effect of an accounting change, resulting in the recognition 
of a
gain of $3,499 million ($2,150 million after-tax)"

Not bad --- take a $2.1 billion dollar deduction for writing-off 
telephone
poles
and other items..Why pay taxes anyway?

Of course things are hard for Verizon. It lost over $1 billion from 
overseas
devaluations in just six months.

"The unrealized foreign currency translation loss in 2004 is primarily
driven by the devaluation of the functional currencies at our 
investments in
Verizon Dominicana, C. por A. (Verizon Dominicana), Vodafone Omnitel 
N.V.
(Vodafone Omnitel) and Compañia Anónima Nacional Teléfonos de Venezuela
(CANTV)."

"Foreign currency translation adjustments  $ 1.049  Billion"

And that's only for the first half of this year... Which brings the 
total
losses overseas to some $11 billion since 2000.

And how do you pay for that? Well, take out loans. The interest on debt
was  about $1.3 billion as of June 2004.--- And we were worried about 
the
national debt.

"Total interest costs on debt balances ---  $1.3 Billion"

But if you really want some cash, just sell off Hawaii-- the customers
of former GTE won't mind

"During the second quarter of 2004, we announced an agreement with
The Carlyle Group to sell our wireline-related businesses in Hawaii,
including Verizon
Hawaii Inc. which operates 707,000 switched access lines, as well as the
services and
assets of Verizon Long Distance, Verizon Online and Verizon Information
Services
in Hawaii, for $1,650 million in cash, less debt."

Of course, if Verizon wants to print more money, they  can simply cut 
staff.

"These expense increases were partially offset in both periods by the 
effect
of work force reductions of approximately 13,300 employees, or 6.0%, 
over
the past year, principally in connection with a voluntary separation 
plan
announced in the fourth quarter of 2003."

In fact, since 2000, Verizon has cut 27% of the staff -- some 65,000
people.  -- So much for Verizon's ability to create new jobs.

And when we hear Verizon is going to give us our new broadband future,
well,  --- just smoke and mirrors. Construction  is down since 2003, 
and way
down since 2000, from an estimated $5.9 billion  for telecom in 2004
from $12.1 billion in 2000.

                                               2004         2000
Annualized  (estimate full year  $5.9)          $12.1

If they're building all this new fiber optic stuff, then how much are
they really spending on my copper wire phone service?

So, of course, we have to ask ---Why hasn't local prices gone down if 
they
cut
staff and cut new construction? What a stupid question.

Some items in this 10q are just plain bizarre. Did you know Verizon is a
polluter,
having been taken to court over problems with nuclear power rods?

"During 2003, under a government-approved plan, remediation of the site 
of a
former facility in Hicksville, New York that processed nuclear fuel 
rods in
the 1950s and 1960s commenced. Remediation beyond original expectations
proved to be necessary and a reassessment of the anticipated remediation
costs was conducted. In addition, a reassessment of costs related to
remediation efforts at several other former facilities was undertaken. 
As a
result, an additional environmental remediation expense of $240 million 
was
recorded in the fourth quarter of 2003. We expect overall remediation
efforts, including soil and ground water remediation and property 
costs, to
take place over the next several years, and our cost estimates may be
revised as remediation continues.".

But none of these items are really affecting the senior management -- 
they
got it made.  According to the Bell Tell Retirees, benefits for senior
management are simply peachy....(proxy vote, 2004)

"Verizon makes large and guaranteed retirement contributions on behalf 
of
certain senior executives that far exceed the benefit formulas that 
apply
either to employees or to managers under the Company's rank-and-file 
pension
plan. Verizon's executive officers receive supplemental compensation 
equal
to 32 of their combined base salary plus bonus (for every dollar above
$200,000) for the first 20 years they participate in the plan. As a 
result,
SENIOR EXECUTIVE OFFICERS ARE GUARANTEED NON-QUALIFIED
PENSION CONTRIBUTIONS NEARLY AS LARGE AS THEIR
ANNUAL BASE SALARY. For example, in 2002, CEO Ivan
Seidenberg garnered $1.4 million, equivalent to 92% of his base salary,
upping his supplemental pension account to $10.8 million. Former 
Chairman
Charles Lee  (Former GTE head) received a nearly $1.8 million 
contribution,
boosting his IDP balance to $27.3 million."

But hey, this is all possible because the Board of Verizon is bought and
paid for it seems.

"- BOARD COMPOSITION:  At least six of the 11 Verizon directors 
nominated on
the 2004 proxy have what we view as material financial relationships 
with
the Company or its officers, directly or through their firms. In 
addition to
CEO Seidenberg, we believe that at least five outside directors are
non-independent due to board interlocks, or because their own employer
receives substantial grants, fees, or business from the Company, or did
in the very near past.

"- Richard Carrion is the CEO of a bank that is Verizon's co-investor in
Puerto Rico Telephone, in which Verizon owns a majority share.

"- Robert Storey is partner in a firm providing legal services to 
Verizon.

"- Joseph Neubauer is Executive Chairman and former CEO of ARAMARK, 
where
Verizon President Lawrence Babbio participated in setting his 
compensation
until last year as a member of the board compensation committee. 
Verizon's
Board finds him non-independent (see 2004 proxy, page 3).

"- Hugh Price was, until last year, CEO of a nonprofit that received
millions of dollars in grants from Verizon and included Verizon CEO
Seidenberg on its governing board (Seidenberg has since left the board).

"- Sandra Moose, until year-end 2003 was Senior Vice President of a firm
paid at least $3.5 million for consulting services since 2000.

"The Corporate Library rated Verizon's Board as one of the "ten worst" 
among
1,700 U.S. companies in its 2003 Board Effectiveness Ratings, stating 
that
"the contracts and compensation policy for both Seidenberg and former 
co-CEO
Lee contain virtually every example of excess and lack of control that 
could
be found at a U.S. corporation, as well as a few that can be found 
nowhere
else."

I'd have my friends vote to increase my salary and perks too -- wouldn't
you?

As I sit here, I can't stop laughing... Since 2003 my local service 
went up
43%, and almost every charge has increased between 16% and 145%.
Here's a picture of my bill:
http://www.newnetworks.com/dirtyphonebill.htm

Maybe I should go to a competitor -- Oh, I forgot, the FCC is about to 
raise
their rates 15% and put them out of business. Or maybe I should get 
VOIP...
Oh, I forgot, it runs over DSL and Verizon is going to be the only one 
left
standing in DSL because the FCC is putting the other DSL competitors 
out of
business as well.

And Verizon won't let me just get DSL without their package of voice
services....

I guess the joke is on us,

Bruce Kushnick, Teletruth.
Author of  that summer reading hit:
 "The Dirty, Little, Secret Lives of Phone Bills"
http://www.teletruth.org



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