Verizon Posts Loss, Mobile Subs Beat View
Verizon Communications posted mobile customer growth that blew past Wall Street expectations for the fourth quarter but it reported a net loss from a hefty charge for worker layoffs.
Verizon, the majority owner of No. 1 mobile service Verizon Wireless, added 2.2 million mobile customers in the quarter compared with the average expectation for 1.5 million from four analysts contacted by Reuters.
It posted a net loss of $653 million, or 23 cents per share compared with net income of $1.24 billion, or 43 cents a share in the same quarter a year ago. Before items such as $3 billion in charges for workforce reductions, Verizon said it would have earned 54 cents per share.
Revenue rose to $27.1 billion from $24.65 billion in the year-earlier quarter, before it bought mobile service Alltel.
This compared with the average analyst estimate for $27.33 billion, according to Thomson Reuters.
Its shares [VZ 30.19 -0.49 (-1.6%) ] fell in premarket trading.
In the growing and lucrative business of selling service for smart phones, AT&T [T 25.26 -0.32 (-1.25%) ] and Verizon are the top dogs, outstripping T-Mobile USA and Sprint Nextel [S 3.3601 -0.0799 (-2.32%) ].
That positions them well as prices for voice service are coming down, while revenue from data is increasing. Increasingly, people use their phones for texting and e-mailing rather than phone calls.
In January, Verizon Wireless cut the price of unlimited voice service. At the same time, it started to require data plans for more of its customers. AT&T quickly followed with similar moves, but both companies are still substantially more expensive than their competitors.
Playing in the smart phone market can be expensive, though: In early January, Verizon said it expects fourth-quarter earnings below Wall Street estimates. The subsidies it pays on new phones lowered its profit margin because it had an unusually high number of new and upgrading customers.
Also, while Verizon Communications benefits from the growth of the wireless industry, it only owns 55 percent of Verizon Wireless, meaning it doesn’t get to keep all of the profits. Vodafone Group [VOD 21.72 -0.03 (-0.14%) ] of Britain owns the rest.
Meanwhile, Verizon’s traditional phone business continues to erode. It’s replacing its copper lines with optical fiber in core areas, which has stemmed revenue declines, but at a high cost.