Verizon Q4 loss doubles, pushed by Sandy, pension costs

The telecommunications provider saw revenue rise nearly 6 percent on strong customer growth in the wireless business.

Verizon CEO Lowell McAdam at the recent Consumer Electronics Show. James Martin/CNET

Superstorm Sandy and mounting pension costs took a toll on Verizon.

The New York telecommunications provider posted a fourth-quarter loss of $4.22 billion, or $1.48 a share, compared with a year-ago loss of $2 billion, or 71 cents a share. The results were affected by costs associated with Superstorm Sandy, which devastated the Northeast region late last year, and by a change in the valuation of its pension liabilities owed to its employees. On an adjusted basis, the company earned 38 cents a share.

The pension liabilities cut into earnings by $1.55 a share, while the early retirement of debt and other restructuring activities cut another 31 cents a share from earnings. Sandy cost another 7 cents a share.

Revenue, meanwhile, rose 5.7 percent to $30 billion.

Analysts, on average, expected Verizon to post earnings of 52 cents a share and revenue of $29.75 billion, according to Thomson Reuters.

One of the highlight numbers was 2.1 million, or the number of net new contract subscribers it added in the quarter. CEO Lowell McAdam disclosed that figure last week during an analyst presentation at the Consumer Electronics Show.

The number is impressive given that nearly every other carrier has seen either continued subscriber losses or drastically reduced growth.

Unsurprisingly, the iPhone played a big part in wireless subscriber growth. The company said that a higher mix of the customers purchased iPhone than before, spurred by the release of the iPhone 5 in October. Verizon Chief Financial Officer Fran Shammo told analysts during a conference call today that the carrier had activated 6.2 million iPhones , with the iPhone 5 making up half of the total sales.

The higher iPhone sales meant a significant hit to wireless margins, a major factor in Verizon's earnings shortfall. Verizon, like every other carrier, has to pay a hefty subsidy to Apple in order to sell the iPhone 5 for as low as $199.

Unlike AT&T, which relies largely on the iPhone for customer growth, Verizon has done a better job of diversifying its reliance on difference devices, largely from its Droid franchise of Android smartphones. But in this quarter, iPhone sales represented a majority of the 9.8 million smartphones sold in the period.

Shammo, however, believes that Verizon will be able to improve the profitability of its wireless business, even with iPhone sales.

"The fundamentals of this business are extremely strong," he said.

Verizon didn't provide an earnings forecast for 2013, but he hinted that earnings growth could be stronger than the 15 percent growth the company saw in the first three quarters of last year.

"I'm more confident in the fundamentals today than a year ago," he said.

Verizon's wireless business, which is jointly owned by Vodafone, posted revenue of $20 billion, up 9.5 percent from a year ago.

It signed up a total of 2.2 milllon net new customers during the period. The company's average revenue per account, a change in the way it measures per-subscriber activity to reflect multiple devices, rose 6.6 percent to $146.80.

The wireline business saw revenue fall 1.5 percent to $10 billion.

Verizon added 144,000 net new Fios Internet customers and 134,000 net new FiOS TV subscribers in the period.

Updated at 4 a.m. and 6:14 PT: to include additional financial details and comments from the chief financial officer.

About the author

Roger Cheng is the executive editor in charge of breaking news for CNET News. Prior to this, he was on the telecommunications beat and wrote for Dow Jones Newswires and The Wall Street Journal for nearly a decade. He's a devoted Trojan alum and Los Angeles Lakers fan.

 

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