Verizon CFO expects little Q3 iPhone margin fall-out

NEW YORK Wed Sep 12, 2012 4:55pm EDT

Related Topics

NEW YORK (Reuters) - Verizon Wireless will not take a big hit to its wireless profit margins this quarter from the Apple Inc iPhone 5 launch this month, according to Fran Shammo, chief financial officer of parent company Verizon Communications.

And the short-term revenue decline from the company's new data share plans will be less than Shammo had feared because customers are buying bigger buckets of data than it had expected, the executive said during an investor webcast on Wednesday.

The new plans, which allow families to share one data plan, and the iPhone launch had been concerns for some investors ahead of Verizon's third quarter results.

Market leader Verizon Wireless and its biggest rivals AT&T Inc and Sprint Nextel all pay Apple hefty subsidies for each iPhone they sell as consumers get discounts for the phones in exchange for signing 2-year contracts.

The device will go on sale at wireless service providers, including Verizon Wireless, for $200 for the cheapest model. This means that Verizon Wireless will pay a subsidy of $449 for most iPhones it sells.

It said that customers can also opt to pay the full retail price of $649 if they don't want to be tied into a 2-year contract. This is the same price as the previous iPhone.

Shammo told an investor conference that because the September 21 launch is late in the quarter it will not result in a "huge detriment" to margins. He also said that any margin pressure would depend on whether there is enough supply to meet demand.

But if volumes are high in the fourth quarter, Verizon Wireless' profit margins will be reduced, he said without giving a specific estimate.

Verizon Wireless reported a wireless service margin of 49 percent for the second quarter based on earnings before interest, tax, depreciation and amortization.

Verizon Wireless is majority owned and controlled by Verizon Communications. Vodafone Group Plc has a minority 45 percent stake in the venture.

Vodafone investors often complain about the fact that Verizon Wireless rarely pays a dividend to its owners.

Shammo declined to say when the next dividend will be but told the investor conference that the company is required to discuss whether it will pay a dividend at the last board meeting of the year.

Verizon shares closed up 1.5 percent to $44.89 on New York Stock Exchange on Wednesday.

(Reporting By Sinead Carew; Editing by Tim Dobbyn and Richard Chang)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.