NEW YORK Verizon Communications Inc VZ.N reported faster subscriber growth and stronger profits than expected at its Verizon Wireless venture with Vodafone Group Plc VOD.L, easing some concerns about intensifying competition if only temporarily.
Investors are worried market leader Verizon Wireless, which is paying $130 billion for Vodafone's 45 percent share in their venture, will cut prices as discounts from No. 4 U.S. mobile service T-Mobile U.S. TMUS.N have drawn responses from No. 2 service AT&T Inc T.N and No. 3 ranked Sprint Corp S.N.
While investors still worry about competition in 2014, Verizon's ability to beat profit and subscriber estimates for the fourth quarter show that it did not overpay to keep customers from switching to rivals so far at least, analysts said.
Verizon, which also announced a small acquisition of the media assets of Intel Corp INTC.0 on Tuesday, saw its shares fall more than 2 percent, despite the strong results.
Some investors appeared to be selling their Verizon shares to hedge their investments ahead of the Vodafone deal, which is expected to close February 21, according to Wells Fargo analyst Jennifer Fritzsche. She said that others, while happy with the fourth quarter, sold from frustration that Verizon has to wait until after the deal close to set financial targets for 2014.
"Nothing in this quarter's results made me worry they weren't holding their own versus the competition," Fritzsche said. But she noted that investors may have wanted more reassurance Verizon will not get roped into a price war.
Chief Financial Officer Fran Shammo said Verizon would respond to competitive pressure when it needs to, and that it tends to set its pricing agenda for the year in January and February, but declined to provide further details.
"What he said adds fire to the worry rather than calming it," Fritzsche said.
Verizon Wireless added 1.6 million subscribers in the quarter, compared with the 1.5 million average estimate of five analysts contacted by Reuters. This beat subscriber growth numbers at T-Mobile US for the quarter.
Its profit margin was 47 percent in the quarter based on earnings before interest, tax, depreciation and amortization, as a percentage of wireless service revenue beat the expectation of four analysts for a margin closer to 46 percent.
Verizon, which also competes with cable operators for video and internet customers, agreed to buy Internet TV technology from chip maker Intel but did not disclose the deal terms.
It plans to use Intel's technology to improve search and discovery features for Verizon's wireline FiOS video service and to help it build a platform to deliver video to mobile devices, Shammo told analysts on the company's conference call.
EARNINGS, REVENUE BEAT
Verizon Communications said it earned $5.07 billion, or $1.76 per share, in the fourth quarter, compared with a loss of $4.23 billion, or $1.48 per share, in the year-ago period, including pension-related charges in both quarters.
Excluding unusual items, its earnings per share of 66 cents beat Wall Street expectations by a penny.
Revenue increased to $31.1 billion from $30.05 billion a year earlier. Wall Street expected $31.02 billion, according to Thomson Reuters I/B/E/S.
The company said wireless customer defections, known in the industry as churn, increased slightly from the year-ago quarter but fell from the third quarter.
On the wireline side, it added 92,000 FiOS video customers and 126,000 net new FiOS Internet connections in the quarter.
Verizon shares were down $1.02, or 2 percent, at $47.36 in afternoon trading on the New York Stock Exchange after falling as low as $46.77 earlier in the session.
AT&T shares were down 26 cents at $33.44 while T-Mobile stock was up 50 cents, or 1.5 percent, at $33.01 and Sprint stock was up 2 cents at $8.99, also on NYSE.
(Reporting by Sinead Carew; Editing by Jeffrey Benkoe, Bernadette Baum and Marguerita Choy)