(Corrects throughout to change EPS figure for purposes of
comparison with I/B/E/S estimates)
* Stock drops 2.6 pct, biggest percentage loser among Dow
* Posts fewer net subscriber adds than rival AT&T
* Adjusted EPS beats Wall Street expectations by 4 cents
* Revenue growth highest in five quarters
By Marina Lopes
NEW YORK, April 24 Verizon Communications Inc's
reluctance to offer mass discounts in a near-saturated
mobile market is costing it new subscribers, analysts said on
Thursday even as the largest U.S. wireless carrier beat Wall
Street's profit expectations.
Shares of Verizon were down nearly 3 percent at midday on
Thursday, making it the biggest percentage loser among Dow Jones
industrial average component stocks.
While its rivals have engaged in aggressive discounting,
Verizon has been more conservative in price cuts in an attempt
to preserve revenue per user at the expense of subscriber adds.
"Verizon and AT&T have solid networks but their price
premium is so large that it is going to be very hard for
everyone to have their cake and eat it too," said Craig Moffett,
a senior analyst at MoffettNathanson.
"They will have to sacrifice growth or margin going forward
and the market is coming to precisely that realization," he
The company has targeted its device installment plans and
discounts at its high-data customers, prompting some low-end
subscribers to switch carriers.
"We've built our brand on a superior network. We are not
going to be the low-cost provider in the marketplace," Verizon's
chief financial officer, Fran Shammo, told Reuters.
"Not every subscriber is equal," he said. "We will take our
time and respond where we need to respond. We will attack the
quality base of customers that we are targeting."
The company's wireless business added 539,000 postpaid
subscribers in the quarter, 20 percent less than in the year-ago
quarter, while No. 2 carrier AT&T Inc added 625,000
subscribers, blowing past Wall Street expectations.
Analysts say that as the industry leader, Verizon is looking
to maintain its premium price point as a sign of a superior
product even at the expense of additional subscribers.
"It is very easy in this industry to lower prices, but it is
almost impossible to raise them," said Roger Enter of Recon
"They are rightfully cautious about not jumping head-on into
what could be a price war," he said.
Excluding unusual items, Verizon's earnings per share of 91
cents beat Thomson Reuters I/B/E/S analyst expectations of 87
cents per share.
The No. 1 U.S. mobile provider earned $5.98 billion in the
first quarter, compared with $4.86 billion in the year-ago
On the wireline side, it said it added 57,000 FiOS video
customers and 98,000 net new FiOS Internet connections in the
The company said wireless customer defections, known in the
industry as churn, increased slightly from a year ago.
Revenue rose 4.8 percent, the highest growth rate in five
quarters, to $30.82 billion from $29.42 billion a year earlier.
Wall Street expected $30.698 billion, according to Thomson
Its February acquisition of Vodafone Group Plc's 45
percent share in their prior joint venture for $130 billion gave
the company access to greater amounts of cash flow.
Verizon shares were down 2.6 percent at $46.18 on the New
York Stock Exchange at midday on Thursday.
(Editing by Matthew Lewis)