Verizon Expanding Horizons

Verizon

Verizon Communications Inc. the biggest telecommunications service provider in the United States. Verizon was founded by Bell Atlantic back in 1998 that were formed after AT&T Corporation.

The name Verizon is a combination of two words, Veritas, which is a Latin word that means Truth and Horizon. The company spent $300 million in promoting the new brand.

Telecommunications companies often have to source great amount of debt to fund their spending on other investments. Verizon on the other hand has a highly leverage capital structure with total a total debt that covers its equity many times.

Verizon’s Equity Capitalization

Equity capital is the foundation of a company’s capital structure which includes the most common and preferred stocks. Verizon, in the last couple of years Verizon had the most issued additional common shares to raise more equity capital.

The company has gained and retained earnings of $11.2 billion dollar as of December of last year. Which was an appreciation from the couple of billion dollars and single deficit in retained earnings for only the years before.

Problems of saturation in the Market

The problem in the market when it comes to Telecommunication companies is that the market is largely stagnant, with the rise of other means of communication like the internet, the Telephone service or landlines, is on stagnant waters or in a declining position.

Another problem of Verizon is that it is also losing in its wholesale services, which decreased its revenue by roughly 5 percent. While its internet and cable services, Fios, is up just over 7 percent.

Look out for Verizon

Verizon’s CEO has talked about the free cash flow growth which the company expects in the next year. Although there is a possibility that the company’s expectations may be met, the company has taken on a tremendous amount of debt and has become less diversified, because it has elements of a high-stakes gamble.

Verizon has over $110 billion in debt, bringing its current ratio to just 0.63. Whether for strategic purpose, or just to give the company a little more space for emergency funds, until its current investments appreciate in the market the company may not be able to get the grant.

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