Verizon Wireless 2012 Annual Report Download - page 35

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Global Enterprise
Global Enterprise offers Strategic services including network products
and solutions, advanced communications services, and other core
communications services to medium and large business customers, mul-
tinational corporations and state and federal government customers.
2012 Compared to 2011
Global Enterprise revenues decreased during 2012 compared to 2011 pri-
marily due to lower local services and traditional circuit-based revenues,
a decline in customer premise equipment revenues and the unfavor-
able impact of foreign currency translation. Core services, which consist
of traditional circuit-based services such as frame relay, private line and
AsynchronousTransferMode(ATM)services,declinedcomparedtothe
similar period last year as our customer base continued to migrate to
next generation IP services. The decline in customer premise equipment
revenues reflects our focus on improving margins by continuing to de-
emphasize sales of equipment that is not part of an overall enterprise
solutions bundle. This decrease was partially offset by higher Strategic
services revenues. Strategic services revenues increased $0.5 billion, or
6.3% during 2012 compared to 2011 primarily due to growth in advanced
services, such as managed network solutions, contact center solutions, IP
communications and our cloud and data center offerings.
2011 Compared to 2010
Global Enterprise Core and Other revenues increased during 2011 com-
pared to 2010 primarily driven by higher Strategic services revenues, in
part due to the inclusion of the revenues of Terremark, partially offset by
lower local services and traditional circuit-based revenues and decreased
revenues from the sale of customer premise equipment. Strategic ser-
vices revenues increased $1.0 billion, or 15.2%, during 2011 compared
to 2010 primarily due to growth in advanced services. Traditional circuit-
based services declined compared to the similar period last year as our
customer base continues to migrate to next generation IP services. The
decline in customer premise equipment revenues reflects our focus on
improving margins by de-emphasizing sales of equipment that is not a
part of an overall enterprise solutions bundle.
Global Wholesale
Global Wholesale provides communications services including data,
voice and local dial tone and broadband services primarily to local, long
distance and other carriers that use our facilities to provide services to
their customers.
2012 Compared to 2011
Global Wholesale revenues decreased during 2012 compared to 2011
primarily due to a decline in traditional voice revenues as a result of
decreasedMOUsanda5.3%declineindomesticwholesaleconnections.
The traditional voice product reductions are primarily due to the con-
tinued impact of competitors deemphasizing their local market initiatives
coupled with the impact of technology substitution. Also contributing
to the decline in voice revenues is the elimination of low margin inter-
national products and the continuing contraction of market rates due
to competition. Partially offsetting the overall decrease in wholesale rev-
enue was a continuing demand for high-speed digital data services from
fiber-to-the-cell customers upgrading their core data circuits to Ethernet
facilities as well as Ethernet migrations from other core customers. As a
result of the customer upgrades, the number of core data circuits experi-
enced a 9.6% decline compared to the similar periods in 2011. We expect
Global Wholesale revenue to continue to decline approximately 10% per
quarter compared to the similar periods in the prior year, as we believe
that the continued decline in core products will only be partially offset by
growth in Ethernet and IP services.
2011 Compared to 2010
The decrease in Global Wholesale revenues during 2011 compared to
2010 was primarily due to a $0.4 billion decline in international voice rev-
enuesasaresultofdecreasedMOUsintraditionalvoiceproductsasa
result of increases in voice termination pricing on certain international
routes, which negatively impacted volume, and continued rate com-
pression due to competition in the marketplace. Switched access and
interexchangewholesaleMOUsdeclinedprimarilyasaresultofwireless
substitution and connection losses. Domestic wholesale connections as
of December 31, 2011 declined 8.3% from December 31, 2010 due to the
continued impact of competitors deemphasizing their local market initia-
tives coupled with the impact of technology substitution. Voice and local
loop services declined during 2011 compared to 2010. Partially offset-
ting the overall decrease in Global Wholesale revenue was a continuing
demand for high-speed digital data services primarily due to fiber-to-
the-cell customers upgrading their core data circuits to Ethernet facilities.
As a result of the upgrading customers, the number of DS1/DS3 circuits
experienced a 9.5% decline compared to the similar period in 2010.
Other
Other revenues include such services as local exchange and long dis-
tanceservicesfromformerMCImassmarketcustomersandoperator
services. The decrease in revenues from other services during 2012 and
2011wasprimarilyduetoreducedvolumes,includingformerMCImass
market customer losses.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued