Verizon Q4 loss widens on charges

115

U.S. telco posts $4.23 billion loss, but revenue grows to over $30 billion on strong performance from Verizon Wireless.

Verizon Communications Inc. reported a fourth-quarter loss Tuesday, as year-end charges and smartphone subsidies weighed down results that included the best-ever customer additions to its wireless service.

Verizon reported a $4.23 billion loss that stemmed largely from massive charges from its pension plan, debt-related costs and storm damage. Revenue rose 5.7%.

The Basking Ridge, N.J., telecommunications giant also added a highest-ever 2.1 million in new wireless contract customers in the quarter, even as overall industry growth has been slow, driven by holiday spending and strong sales of Apple Inc.’s iPhone 5, which is the first to run on next-generation LTE networks.

As expected, margins on wireless services dropped in the quarter as subsidies paid on all of those smartphones were a direct hit to profits. Verizon Wireless is a joint venture that is 45% owned by Vodafone Group PLC.

“We knew margins were going to be light, but they were a little lighter than expected,” said Jonathan Chaplin, analyst at New Street Research, who noted that customer trends across Verizon were strong in the quarter.

“What we learned today was that it cost them a little bit more on the expense line than we thought,” he said. He noted that 2012 was strong for the overall business, but investors want to know what the company plans to do for 2013.

Verizon shares initially slid Tuesday but turned around as the company projected stronger wireless margins for 2013 and noted that it could soon repurchase shares. The stock recently rose 26 cents to $42.80.

On a conference call Tuesday, Chief Financial Officer Fran Shammo said he has “confidence we can drive top line growth in 2013.”

Verizon didn’t provide specific guidance for 2013. Mr. Shammo said he’s “more confident in the fundamentals of this business today than I actually was a year ago,” noting per-share earnings growth of 15% in the first three quarters of 2012.

He also said wireless margins in 2013 would be 49% to 50%, a jump from the 46.6% it reported for 2012.