Verizon Wireless 2010 Annual Report Download - page 17

As of December 31, 2010, we passed 15.6 million premises with our high-
capacity fiber optics network operated under the FiOS service mark.
With FiOS, we have created the opportunity to increase revenue per cus-
tomer as well as improve Wireline profitability as the traditional fixed-line
telephone business continues to decline due to customer migration to
wireless, cable and other newer technologies.
We are also focused on gaining market share in our enterprise busi-
ness through the deployment of strategic enterprise service offerings,
including expansion of our Voice over Internet Protocol (VoIP) and inter-
national Ethernet capabilities, the introduction of video and web-based
conferencing capabilities, and enhancements to our virtual private net-
work portfolio. During 2010, revenues from strategic enterprise services
grew 6.3% compared to 2009 and represent more than 42% of total
Global Enterprise revenues.
Profitability Improvement – Our goal is to increase operating income
and margins. Strong wireless data and FiOS revenue growth continue
to positively impact operating results. In addition, while revenues in the
business market continue to be affected by macro-economic pressures,
we are seeing some signs of stability. If there is a sustained economic
recovery, it should positively impact our revenue and profitability in
future quarters. However, we remain focused on cost controls with the
objective of driving efficiencies to offset business volume declines.
Operational Efficiency – While focusing resources on revenue growth
and market share gains, we are continually challenging our manage-
ment team to lower expenses, particularly through technology-assisted
productivity improvements, including self-service initiatives. These
and other efforts, such as real estate consolidation, call center routing
improvements, a centralized shared services organization, and informa-
tion technology and marketing efforts, have led to changes in our cost
structure with a goal of maintaining and improving operating income
margins. Through our deployment of the FiOS network, we expect to
realize savings annually in our ongoing operating expenses as a result of
efficiencies gained from fiber network facilities.
Customer Service – Our goal is to be the leading company in customer
service in every market we serve. We view superior product offerings and
customer service experiences as a competitive differentiator and a cata-
lyst to growing revenues and gaining market share. We are committed
to providing high-quality customer service and continually monitor cus-
tomer satisfaction in all facets of our business. Verizon Wireless ranked
highest among wireless providers in small to mid-sized business cus-
tomer satisfaction in the J.D. Power and Associates 2010 U.S. Business
Wireless Satisfaction Study released in June. During 2010, J.D. Power and
AssociatesalsorankedFiOSTVservicewiththe“HighestinResidential
TelevisionServiceSatisfactionintheEastRegion”intheJ.D.Powerand
Associates2010ResidentialTelevisionServiceSatisfactionStudy.
Performance and Values-Based Culture – We embrace a performance
and values-based culture that demonstrates our commitment to integ-
rity, respect, performance excellence, accountability, and putting our
customersfirst.OurindividualandteamobjectivesaretiedtoVerizon’s
strategic imperatives. Key objectives of our compensation programs are
pay-for-performanceandthealignmentofexecutives’andstockholders’
long-term interests. We also employ a highly diverse workforce, as respect
fordiversityisanintegralpartofVerizon’scultureandacriticalelementof
our competitive success.
Trends
We expect that competition will continue to intensify with traditional,
non-traditional and emerging service providers seeking increased market
share. We believe that our networks differentiate us from our competi-
tors, enabling us to provide enhanced communications experiences to
our customers. We believe our focus on the fundamentals of running a
good business, including operating excellence and financial discipline,
gives us the ability to plan and manage through changing economic
conditions. We will continue to invest for growth, which we believe is the
key to creating value for our shareowners.
Customer and Operating Trends
In our Domestic Wireless segment, we expect to continue to attract and
maintain the loyalty of high-quality retail postpaid customers, capital-
izing on customer demand for data services, and bringing our customers
new ways of using wireless services in their daily lives. We expect that
future customer growth will accelerate as a result of the introduction of
new smartphones, including the iPhone 4, internet devices, such as tab-
lets, and our suite of 4G LTE devices. We believe these devices will attract
and retain higher value customers, contribute to continued increases in
the penetration of data services and keep our device line-up competi-
tive versus other wireless carriers. We expect future growth opportunities
will be dependent on expanding the penetration of our data services,
offering innovative wireless devices for both consumer and business
customers, and increasing the number of ways that our customers can
connect with our network and services.
In recent years, we have experienced continuing access line losses in our
Wireline segment as customers have disconnected both primary and
secondary lines and switched to alternative technologies, such as wire-
less, VoIP and cable for voice and data services. We expect to continue
to experience access line losses as customers continue to switch to alter-
nate technologies.
Despite this challenging environment, we expect that key aspects of our
wireline business will continue to grow by providing superior network
reliability as we continue to offer innovative product bundles that include
high-speed Internet access, digital television and local and long distance
voice services, offering more robust IP products and services as well as
accelerating our cloud computing strategy. We will continue to focus on
cost efficiencies to attempt to offset adverse impacts from unfavorable
economic conditions and secular changes.
Operating Revenue
We expect to experience service revenue growth in our Domestic
Wireless segment, primarily as a result of the growth of our customer
base as well as continued data revenue growth driven by increased pen-
etration of data services resulting from increased sales of smartphone
and other data-capable devices. We expect that the introduction of new
smartphones, including the iPhone 4, and our suite of 4G LTE devices
willcontributetoanincreaseinouraveragerevenueperuser(ARPU)for
data. However, we expect to continue to experience sequential declines
in our overall average voice revenue per user due to the ongoing impact
of customers seeking to optimize the value of our voice plans. We expect
that our future service revenue growth will be substantially derived from
data revenue growth as we continue to expand the penetration of our
wireless data offerings and increase our sales and usage of innovative
wireless smartphone and other data-capable devices.
Although we have experienced declines in Domestic Wireless Equipment
and other revenue as a result of a reduction in the number of wireless
devices sold, we expect that sales of newly introduced devices will
result in increased sales volume and an overall increase in revenues from
device sales.
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Management’sDiscussionandAnalysis
ofFinancialConditionandResultsofOperations – As Adjusted continued