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Verizon stays mum on Yahoo as customer growth rebounds

The Yahoo deal's supposed to be the next big step in Verizon's transformation, but it's on hold as both companies assess the impact of Yahoo's data breaches.

Verizon's still on track to buy Yahoo, but it's waiting for the results of an investigation.
Josh Miller/CNET

No really Verizon, how do you feel about Yahoo?

In Verizon's fourth-quarter report on Tuesday, references to Yahoo, which the telecom giant agreed to acquired for $4.8 billion, are buried near the end with little additional insight.

You could forgive Verizon for being skittish when it comes to talking about Yahoo, a business it once coveted for its user base and media properties, but where it now sees only controversy. While Verizon would say only that it's working with the internet portal to assess the damage from its data breaches, Yahoo said Monday it believes the deal will be consummated despite a delay.

"The opportunities ahead with Verizon look bright," Yahoo CEO Marissa Mayer said in a statement.

Verizon was comparatively more terse: "We have not reached any final conclusions yet," Chief Financial Officer Matt Ellis said on a conference call with analysts.

Those opportunities have probably dimmed a bit from July, when Verizon first announced the planned takeover. Since then, Yahoo has disclosed that it was the victim of the two largest hacks in history, and it is reportedly under investigation by the US Securities and Exchange Commission over allegations that it didn't move fast enough to tell investors about its security problems.

Yahoo was supposed to be the linchpin to Verizon's efforts to transform its business away from that of a mere carrier. It isn't interested in delivering just home internet, TV and wireless services anymore; it wants to take advantage of the exploding ad market by creating content, delivered through a variety of avenues including its mobile app Go90. Yahoo was supposed to bring more than a billion eyeballs for those ads.


Yahoo CEO Marissa Mayer is still confident in the Verizon deal.

Ethan Miller, Getty Images

When you look at Verizon's quarterly results, it's clear why the New York telecommunications company is so keen to make the change.

Verizon added a net 167,000 new phone customers in the fourth quarter. It's an improvement from the decline of 36,000 phone customers in the third quarter, but still far behind the 933,000 postpaid customers -- people who pay at the end of the month -- that T-Mobile added in the same period.

The results underscore the continuing competitive environment in the wireless business, which was heightened by availability of a new iPhone and related promotions offered by each of the carriers. Verizon had long considered itself above the fray, with its reputation for network quality justifying its premium price. But the results from the last few quarters suggest T-Mobile and Sprint have been successful at picking off subscribers.

Indeed, Verizon had to roll out aggressive promotions to stay competitive, a move that hurt its profits, according to Jeffries analyst Mike McCormack. He noted that overall phone growth was still weaker with the turnover rate higher than expected.

Verizon blamed the higher customer turnover rate on more tablet customers dropping off the service. Many of those customers got free tablets in exchange for a commitment to pay for wireless service, and likely canceled the connection when their commitment period ran out.

For the fourth quarter, Verizon posted a profit of $4.6 billion, or $1.10 a share. Excluding one-time items, earnings were 86 cents a share, compared with 89 cents a year ago. Revenue fell 5.6 percent to $32.3 billion.

The company was slated to earning 89 cents a share on revenue of $32.09 billion, according to Yahoo Finance.

Verizon shares fell 3.6 percent to $50.53 in premarket trading on Tuesday.

Updated at 6:06 a.m. PT: To include an additional comment from Verizon's CFO and analyst comments.

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