Verizon Communications Inc.

VERIZON COMMUNICATIONS INC. $32 (New York symbol VZ; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 2.8 billion; Market cap: $89.6 billion; Price-to-sales ratio: 0.9; WSSF Rating: Average) gets 70% of its profits and 45% of its revenue from its wireless division, which consists of its 55% stake in Verizon Wireless. (U.K.-based Vodafone plc owns the other 45%.) Verizon Wireless has 87.7 million customers in 50 states. The remainder comes from the traditional telephone division, which has over 35 million household and business clients in 25 U.S. states. In the past few years, Verizon has built up its wireless business and cut its reliance on its traditional phone operations. That helped its revenue rise from $71.3 billion in 2004 to $97.4 billion in 2008. Earnings fell from $2.59 a share (or a total of $7.3 billion) in 2004 to $2.36 a share (or $6.8 billion) in 2007, but rebounded to $2.54 a share (or $7.2 billion in 2008).

Alltel added 13 million wireless users

...

ATLANTIC TELE-NETWORK $38.82 (Nasdaq symbol ATNI; SI Rating: Speculative) (340-777-8000; www.atni.com; Shares outstanding: 15.2 million; Market cap: $591.2 million) is up over 38% since it announced that it plans to buy more than 800,000 wireless accounts from Verizon Wireless for $200 million in cash. These subscribers are mostly in rural areas of Georgia, North Carolina, South Carolina, Illinois, Ohio and Idaho. Atlantic is paying just $250 per subscriber. That’s much less than the $1,567 per subscriber that AT&T paid when it bought wireless accounts from Verizon last month. (AT&T’s purchase was also related to the Alltel acquisition.) These new accounts will bring Atlantic’s total number of wireless subscribers above one million, up from 200,000 today, and make it one of the largest wireless carriers in the U.S. Right now, Atlantic gets about 49% of its revenue from its 80% interest in Guyana Telephone and Telegraph Company (GT&T). The rest comes from its wireless interests in the Caribbean and Bermuda, and from small holdings in the U.S....

ATLANTIC TELE-NETWORK, $38.46, symbol ATNI on Nasdaq, jumped 50% this week after it announced plans to buy more than 800,000 wireless accounts from Verizon Wireless for $200 million in cash. The subscribers are mostly in rural areas of Georgia, North Carolina, South Carolina, Illinois, Ohio and Idaho. Verizon had to sell these accounts as part of the regulatory approval for its recent purchase of Alltel. Competition regulators still need to approve the deal, but it should close by the end of this year. Atlantic is paying just $250 per subscriber. That’s much less than the $1,567 per subscriber that AT&T paid when it bought wireless accounts from Verizon last month. (AT&T’s purchase was also related to the Alltel acquisition.)...

VERIZON COMMUNICATIONS INC., $29.61, New York symbol VZ, plans to merge parts of its local-phone operations in 14 states with those of Frontier Communications Corp. (New York symbol FTR). As a result, Verizon shareholders will get one Frontier share for roughly every 4.2 Verizon shares. The company will finalize the exact exchange ratio just prior to the merger. This is a tax-deferred distribution, so investors will only be liable for capital-gains taxes on their new Frontier shares when they sell them. Verizon shareholders will control 68% of the new company. Verizon itself will get $3.3 billion in cash and debt securities. It will probably use the cash to pay down its $55.7-billion long-term debt, which is equal to 66% of its market cap. The assets that Verizon will spin off mainly consist of 4.8 million land lines in rural areas. As of March 31, Verizon had 35.2 million land lines in 25 states. The deal, which will probably close sometime next year, will make Frontier the fifth-largest local phone service provider in the U.S., with 7.1 million lines in 27 states....

VERIZON COMMUNICATIONS INC., $30.55, New York symbol VZ, reported this week that its revenue rose 11.6% in the three months ended March 31, 2009, to $26.6 billion from $23.8 billion a year earlier. This beat analysts’ forecasts of $26.3 billion. Most of this gain is the result of last January’s purchase of Alltel Corp., which sells wireless services mainly in the rural parts of 34 U.S. states. If you assume that Verizon acquired Alltel on January 1, 2008, Verizon’s revenue would have risen 3.3%. Verizon’s earnings gained 2.9%, to $1.8 billion from $1.7 billion a year earlier. Earnings per share rose 3.3%, to $0.63 from $0.61 on fewer shares outstanding. These figures exclude the cost of integrating Alltel....

Sprint Nextel Corp., $2.42, symbol S on New York (Shares outstanding: 2.8 billion; Market cap: $6.7 billion), provides communications services to commercial and residential customers in the U.S. The Kansas-based company has two segments: i) Wireless, which accounts for 82% of Sprint’s revenues, serves over 5.05 million customers in 50 states under the Sprint brand. Sprint also offers digital-wireless services under its Nextel brand. Sprint’s Boost Mobile prepaid wireless and Boost Unlimited, a local-calling prepaid service, target the youth market. Sprint also offers wireless services to resellers known as mobile virtual network operators (MVNOs). MVNOs buy wireless services at wholesale rates and resell them under their own brands. Some of Sprint’s MVNO clients include Virgin Mobile USA, Qwest, Movida, Helio and Embarq....

NEWMONT MINING CORP., $39.78, New York symbol NEM, has agreed to buy the 33.3% of the new Boddington gold mine, in western Australia, that it does not already own from AngloGold Ashanti Ltd. Newmont will pay $1.1 billion, consisting of cash, stock and future royalties. The purchase price is roughly 30% more than Newmont’s likely 2008 earnings of $840 million, or $1.85 a share. Newmont plans to issue up to 34.5 million new common shares, at $37 each, to pay for this...

As I’ve said several times in the past few weeks, you can only spot a market bottom (a reversal in a falling trend in stock prices) in hindsight. Then too, a market can hit bottom, put on a healthy bounce, then go back down to the bottom once again before going on to a lasting rise. But I do feel that a lot of the risk of further decline is now out of the market. My view is that stocks are likely to move substantially higher in the next 6 months to a year, if not sooner. VERIZON COMMUNICATIONS INC. $30.05, New York symbol VZ, owns 55% of Verizon Wireless, a joint venture with UK-based Vodafone. Verizon Wireless has now received most of the regulatory approvals it needs for its acquisition of privately held Alltel Corp., which provides wireless services to 13 million customers in mainly rural areas of 34 U.S. states. Regulators imposed several conditions on the takeover, including exiting certain markets. However, these conditions should not significantly diminish the future profitability of the combined operations, which will be the largest wireless provider in the United States with over 80 million customers. Verizon Wireless aims to complete the takeover in the next few weeks....

VERIZON COMMUNICATIONS INC. $31 (New York symbol VZ; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 2.9 billion; Market cap: $89.9 billion; WSSF Rating: Average) provides telephone services to over 140 million customers in 28 states. Through 55%-owned Verizon Wireless, a joint venture with UK-based Vodafone, it also has 59 million wireless subscribers in 50 states. Verizon’s wireless operations supply about half of its revenues, but 75% of its profits. These figures should rise now that Verizon Wireless has agreed to buy privately held Alltel Corp., which provides wireless services to 13 million customers in mainly rural areas of 34 states. The purchase will make Verizon Wireless the largest wireless provider in the United States, with over 80 million customers. Verizon Wireless will pay $5.9 billion in cash and assume Alltel’s debt of $22.2 billion, for a total price of $28.1 billion. Verizon’s share works out to $15.5 billion. Verizon feels the merger will generate annual cost savings of $1 billion in the second year after closing....

AT&T INC. $29 (New York symbol T; Income Portfolio, Utilities sector; Shares outstanding: 5.9 billion; Market cap: $171.1 billion; WSSF Rating: Average) provides traditional local and long-distance telecommunication services to over 59 million customers in 22 states. It also has 73 million wireless subscribers nationwide, and 14.7 million high-speed Internet customers. Unlike Verizon, AT&T gets just half of its earnings from its wireless business. However, demand for its wireless services is growing strongly. That’s partly due to AT&T’s exclusive deal to sell Apple’s iPhone. AT&T offers the iPhone at a discount to entice customers to sign a long-term contract. As part of a new deal with Apple, AT&T will now pay more to subsidize the initial cost of the latest version of the device. However, the new iPhone can access the Internet and receive email much more quickly than the older version. Rising revenues from Internet use should help AT&T offset the higher subsidies....