Verizon Earnings Sag, but Posts Record Subscriber Increase Driven by iPhone
January 22, 2013 3:19 PM
Verizon widens its mobile lead
Verizon Wireless -- the U.S. mobile carrier jointly owned by Verizon Communications Inc. (
) and Vodafone Group Plc. (
) -- has aired its
Q4 2012 financials
and they paint a pretty intriguing picture.
On one hand you have Verizon blazing on the
warpath of continued growth
. Big Red added a record 2.1m customers, broadening its lead over rival AT&T, Inc. (T). The sales were heavily impacted by Verizon's
year-old deal with Apple
, Inc. (
); in fact 87 percent of new subscribers reportedly purchased an iPhone 5. IPhone sales doubled to 6.2 million units in total.
The company now has 98.2 million wireless subscribers. AT&T has not yet disclosed its subscriber count, but it is expected to fall in the 60-70 million range. Verizon enjoys a health lead over AT&T, the second place U.S. wireless carrier in terms of subscribers.
The iPhone 5 drove Verizon's record subscriber growth, accounting for 87 percent of new subscriptions. [Image Source: AP]
Verizon also continues to
accelerate its LTE deployment
, moving 7.3 million LTE smartphones and hotspots for the quarter. The carrier's LTE network now accounts for 50 percent of its data traffic and covers 276 million Americans nationwide.
But the dollar figures painted a different tale -- Verizon earned a mere 45 cents per share, excluding one-time restructuring fees and costs relating to Hurricane Sandy's damage (which totaled 7 cents per share). Analysts had hoped for a healthier 50 cents per share, the average target in a
The profit was hurt by the same factor that drove the record subscriber growth -- Big Red's equally big subsidies. Avi Greengart, an analyst with Current Analysis,
that the tradeoff may pay off in the long run, but is painful fiscally in the short term. He comments, "It’s a big upfront cost on smartphones and a short-term hit. They have to offer enormously expensive phones at affordable prices to move customers onto higher-priced plans."
T-Mobile USA, which is in the process of merging with MetroPCS Communications Inc. (PCS) is
in the process of ditching subsidies
going towards a more European pricing model
of cheaper plans and more expensive (unsubsidized) phones. Verizon Wireless, though, has
blasted that push
, arguing subsidies are a necessary evil.
When charges are considered Verizon Wireless posted a loss of $4.23B USD. However, that figure was probably the least troublesome to investors, as it was mainly driven by a one-time $7.19B USD charge that covered severance pay/benefits and adjustments to pension debt.
Overall Verizon made $30B USD in revenue, up 5.7 percent from a year ago. That figure was in line with the analyst estimates of $29.8B USD.
But even on the growth front there was one sore spot for Verizon. New subscriptions of the company's FiOS internet service stalled to only 134,000, down from the 194,000 it gained a year ago.
"Young lady, in this house we obey the laws of thermodynamics!" -- Homer Simpson
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