May 16, 2021

Storm and Pension Costs Leave Verizon With Bigger Quarterly Loss

Verizon Communications is still adding plenty of customers and selling a lot of cellphones, but the impact of Hurricane Sandy and pension costs sank the company’s quarterly earnings.

In November, the hurricane knocked out wireless service for all of the big carriers in the Northeast. But Verizon, based in New York, was hardest hit.

The storm surge flooded its central offices in Lower Manhattan, Queens and Long Island, causing power failures, which disrupted a large portion of its old landline service in those areas. The company took about a week to restore most of its wireless service.

“Sandy had a dramatic effect, particularly on the wire line business, due to the heavy concentration of damage in the New York metropolitan area,” said Francis J. Shammo, chief financial officer of Verizon, on the company’s earnings conference call. “Our challenge was to restore service to customers as quickly as possible, while still managing to meet the demand for new services.”

The company reported on Tuesday a fourth-quarter loss of $4.22 billion, or $1.48 a share, more than double the loss a year ago. Damage from the hurricane cost 7 cents a share, and pension charges reduced earnings by $1.55 a share, Verizon said. Without those charges, the company would have earned 45 cents a share, lower than the 50 cents predicted by analysts surveyed by Thomson Reuters.

Revenue climbed to $30.05 billion, a 5.7 percent increase from a year ago, and slightly higher than estimates.

Verizon said its wireless business, a joint venture with Vodafone of Britain, had a strong quarter. It sold 9.8 million smartphones, compared with 7.7 million in the same quarter a year ago, and added 2.1 million contract subscribers, the most valuable type of customer, versus 1.2 million a year ago.

The iPhone was Verizon’s top-selling smartphone in the quarter, with 6.2 million sales — almost half of which were the iPhone 5, the latest model of the phone. The strong number suggests that demand for Apple’s smartphone is not weakening, despite previous reports that Apple had reduced orders for iPhone parts because sales were slower than expected.

Android phones made up a majority of Verizon’s remaining smartphone sales. Verizon said sales of Windows phones had steady but slow growth.

Chetan Sharma, an independent mobile analyst who does consulting for carriers, said it was impressive that Verizon Wireless continued to post strong phone sales while expanding its customer base. Its phone plans are generally more expensive than the competition’s, and growth of the business shows that customers have faith in Verizon’s network technology, Mr. Sharma said.

Verizon is leading the race to build out its fourth-generation network, called LTE, which is faster and more efficient than its predecessor. The company has deployed LTE in 476 cities; ATT, the second-biggest American carrier, is second with 135 cities.

“The investment they’ve made in the network is showing,” Mr. Sharma said. “When consumers think of changing operators or upgrading, they’re choosing Verizon because of what they’ve experienced, as well as what they’ve heard about the network in terms of reliability across the country.”

This year is shaping up to be another strong one for Verizon. Its new shared data plans, which allow customers to pay for one pool of data and share it across multiple smartphones, tablets and laptops, are helping it bring in more money from subscribers over all. Average monthly revenue from each account grew 6.6 percent to $146.80 in the fourth quarter. Already, 23 percent of Verizon’s accounts are on shared data plans.

The faster the network, the faster people will use their data allowance and eventually buy more. On top of that, data is getting cheaper for Verizon to deliver. The company says the 4G LTE network is five times more efficient than its predecessor, 3G. That means the more people who buy devices that connect to the newer network, like the iPhone 5, the more money the company will eventually gain.

“As more customers choose 4G LTE smartphones and devices, we expect the continued migration of data traffic from 3G to our lower-cost 4G LTE network will drive further improvements in operating and capital efficiency in 2013 and beyond,” Mr. Shammo said in the earnings call.

This month, Research in Motion is expected to release its BlackBerry 10 smartphones. Mr. Shammo said Verizon was hopeful that the new phones would be successful.

“We have very loyal BlackBerry users in our base, and we will see how that goes,” he said. “I think more choice for our customers is better for us and for the consumer and for competition.”

Article source:

Speak Your Mind