Verizon Communications: debt reduction efforts on track

By Jennifer Lanning Drey

Portland, Ore., July 27 - Verizon Communications Inc.'s debt reduction efforts are going according to plan, with net debt totaling $64.1 billion at the end of the second quarter, John Killian, chief financial officer of Verizon, said during the company's quarterly earnings conference call held Monday.

Verizon's pro forma net-debt-to-EBITDA ratio was 1.8 times on a trailing-12-month basis at the June 30 quarter end, he said.

The company has now fully repaid the $12 billion bridge loan associated with its January 2009 acquisition of Alltel Corp. through the issuance of a series of notes at Verizon Wireless and cash generated from operations, Killian said.

"Our balance sheet is healthy and will continue to improve over the next few years as we continue to pay down Wireless debt," he said.

Verizon also reported improved cash generation in the first half of 2009 with cash flows from operations of $14.1 billion. The figure represents a nearly 12% improvement over cash flows from operations for the first six months in 2008. Free cash flow was $6.0 billion for the first six months of the year, up $1.8 billion from the same period in 2008.

The company worked to drive free cash flow in the first half of the year through diligence in capital spending, he said.

Verizon remains focused on its cost structure and believes there are significant opportunities to further reduce costs over the next few years, Killian later added.

"Our cash outlook is strong and will allow us to continue investing for growth while improving our capital efficiency and pay an attractive dividend," he said.

Verizon's second-quarter total operating revenues grew to $26.9 billion, up 11.3% from the prior-year quarter, including revenues from Alltel. On a pro forma basis, operating revenue growth was just under 2%.

The company said demand for its wireless, broadband and video products showed resilience in the second quarter, despite the continued recession.

Verizon is a New York-based broadband and telecommunications company.

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