December 1, 2000 -- (Reuters) - Verizon Communications raised its earnings forecasts through 2002 to reflect the termination of its plans to buy a controlling stake in NorthPoint Communications Group.

Verizon said its previous earnings forecasts included costs related to the proposed NorthPoint deal. On Wednesday Verizon canceled its $800 million pact to buy a 55 percent stake in NorthPoint due to deterioration in the finances of the high-speed Internet access company.

Verizon said it now expects profits in 2001 to grow about 8 percent, with earnings ranging from $3.13 to $3.17 per share. It previously forecast profit growth of 5 to 6 percent, with earnings ranging from $3.06 to $3.10 per share.

For 2002, Verizon now expects earnings growth of about 12 percent, with earnings ranging from $3.49 to $3.54 per share. It previously targeted growth of 11.5 to 12 percent, with earnings of $3.41 to $3.46 per share.

Verizon will take a one-time charge in the fourth quarter of 2000 to reflect a decline in value of the $150 million in convertible preferred NorthPoint stock it bought in September. Excluding that charge, Verizon expects fourth-quarter earnings to be in the range of 76 to 78 cents a share.

Shares of Verizon fell 1/4 to $55-9/16 on the New York Stock Exchange. NorthPoint's stock plunged $1-1/2, or 75 percent, to 1/2 on Nasdaq.

Verizon agreed in August to purchase a controlling stake in NorthPoint and merge the companies' digital subscriber line (DSL) businesses. DSL technology provides high-speed Internet access over copper telephone wires.

The deal would have helped the companies accelerate their DSL expansion plans. Verizon would have benefited from NorthPoint's geographic reach and business clients, while NorthPoint would have gotten an infusion of cash.

The fate of the deal was called into question earlier this month when NorthPoint restated its third-quarter financial results after it discovered some of its customers may not have the money to pay for services received.

NorthPoint contended Verizon was not entitled to terminate the agreement and it would explore its "legal remedies." NorthPoint also will examine its funding options since Verizon said it had no obligation to arrange for NorthPoint to get additional financing.

With the cancellation of the NorthPoint deal, Verizon now must find a new way to expand its operations, including voice, data and high-speed Internet access.

As part of the regulatory approval for the merger of Bell Atlantic and GTE, which created Verizon, the company agreed to expand beyond its core East Coast territory. The NorthPoint deal would have helped satisfy that commitment.

Now, Verizon said it will meet that commitment through various means, including its acquisition of OnePoint Communications and its minority ownership stake in Metromedia Fiber Network, which provides fiber optic network connections. Verizon also holds a minority stake in Genuity, the former Internet arm of GTE.

"We have a solid platform to attack adjacent geographic territories in a way that conserves capital and and preserves the competitive advantage of a facilities based approach," Verizon Vice Chairman Larry Babbio said in a conference call with analysts and reporters.

Verizon will "extend existing facilities to those out of region markets where we have a natural customer base," Babbio said. It will divert some of the money it would have invested in NorthPoint to expand in new markets that are adjacent to its home territory.

Over the next two years, Verizon will move into markets such as Los Angeles, Chicago, Dallas, and Cincinnati. These new territories represent potential revenues of $500 million within three years, the company said.