July 27, 2021

Smartphone Sales Are Strong, but Verizon Has a Loss

Verizon Communications on Tuesday reported rising iPhone sales and revenue growth in its wireless business, but it booked a quarterly loss, primarily because of previously announced pension charges.

The company reported a net loss of $2 billion, or 71 cents a share, for the fourth quarter of 2011, in contrast to net income of $2.64 billion, or 93 cents, in the quarter a year earlier. Revenue climbed 7.7 percent, to $28.44 billion in the quarter, from $26.4 billion in the quarter a year earlier.

Adjusted for the pension charges, the income was 52 cents a share, just below the average forecast of 53 cents from analysts. Revenue was right in line with expectations, according to Thomson Reuters. Shares of Verizon fell 61 cents, to $37.79.

“Verizon finished 2011 very strong, both in terms of revenue growth and by delivering an 18.2 percent total return to our shareholders for the full year, and the company has great momentum for 2012,” Lowell C. McAdam, Verizon’s chief executive, said in a statement.

The company said strong sales of smartphones drove its wireless business to its best quarterly growth rate ever, up 13 percent to $18.3 billion in revenue. Verizon sold 7.7 million smartphones in the fourth quarter, 4.2 million of which were iPhones.

The company added 1.5 million wireless subscribers over the quarter, bringing its total subscriber count to 108.7 million.

“We have great momentum in wireless, and we expect to build on that strength,” said Francis J. Shammo, chief financial officer of Verizon, during a conference call after the earnings report was released.

Profit margins, however, dropped because of the high subsidies that Verizon pays for each new iPhone bought by customers when they commit to a two-year contract.

Wireless carriers subsidize a part of the retail price on most new cellphones to attract customers. The companies recoup the costs over the duration of the customer’s contract.

Verizon said this week that it had a large lead over its rival ATT in the race to build out a newer, faster network called 4G Long Term Evolution, or LTE. The company says it now has LTE networks deployed in 195 markets, compared with ATT’s 26 markets, and it plans to make coverage from such so-called fourth-generation networks as ubiquitous as its older third-generation networks by mid-2013. Verizon said it sold 2.4 million 4G devices in the fourth quarter.

Mr. Shammo added that Verizon’s wireless business intends to expand in the business market, as the company is planning wireless innovations for automobiles, health care and energy conservation.

He said Verizon is advancing its lead in 4G at a time when ATT is trying to obtain more spectrum needed to expand its networks. In one effort to gain spectrum, ATT tried to merge with T-Mobile USA, but eventually withdrew the bid after it faced resistance from government agencies over antitrust concerns.

While ATT was pursuing the merger, Verizon made a deal with a consortium of cable companies, including Comcast and Time Warner, for $3.6 billion worth of spectrum.

Though ATT is far behind in acquiring spectrum, it is not out of the 4G game, said Christopher C. King, a telecom analyst at Stifel Nicolaus. The company still has enough spectrum to deploy its nationwide 4G LTE network.

Verizon’s wireline business, which includes traditional landlines, continued to shrink. Quarterly revenue decreased 1.5 percent, to $10.14 billion.

To Simon Leopold, an analyst at Morgan Keegan, Verizon’s aggressive pursuit of 4G networks symbolizes its continued investment in superior technologies to attract consumers and beat rivals. “ ‘It’s the network’ is not just a tagline with Verizon,” Mr. Leopold said. “It’s something that’s deep within their culture.”

Verizon’s expansion of 4G will probably create new opportunities for makers of networking equipment, like Cisco, Alcatel Lucent and Juniper, meaning consumers can expect a wave of new devices compatible with the faster network in the coming year, Mr. Leopold said.

This article has been revised to reflect the following correction:

Correction: January 24, 2012

An earlier version of this article used net income figures that understated Verizon’s losses. It now uses updated net income figures that show the company lost $2 billion, not $212 million.

Article source: http://feeds.nytimes.com/click.phdo?i=cbf38fc8b376196b6de72a75996d0d67

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