Can Verizon defy gravity?



Call me a skeptic but I just don't believe Verizon has dodged the slowing economy. A company that takes in nearly $100 billion in revenue from mostly the U.S.--bigger than the vast majority of world governments--and has more customers than most European countries--will just have to feel it in their sales numbers as the U.S. economy continues what is a major slowdown, if not yet a recession.

Verizon CFO Doreen Tobin in a Webcast yesterday said she pores over Verizon's revenue data each day and, apart from softness in the Midwest, had yet to see any trend line decline. She claimed the bundling of FiOS TV and high-speed Internet with basic telephony was immunizing the giant telco from the economy.

In case anyone had not noticed the Federal Reserve last week pushed through an emergency 0.75 per cent rate cut--the biggest in 23 years--on top of the four successive reductions since September. And there may be further cuts this week. That sounds like a central bank playing catch up and/or panicking and, in the face of what remains bullish inflation, confirms what the Fed's boffins really think is happening.

History says it takes around 14 months for a business cycle to recover and the scary point is we don't know if we are anywhere near the bottom of a decline largely driven by commercial banks refusing to renew credit. The raw data is full of worst numbers in 20/30/40 years, and that all suggests 2008 is not going to be pretty. Bundles or no bundles. -Tom

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