By Sinead Carew
NEW YORK Jan 21 Verizon Communications Inc
reported faster subscriber growth and stronger profits
than expected at its Verizon Wireless venture with Vodafone
Group Plc, 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. have drawn responses from No. 2
service AT&T Inc and No. 3 ranked Sprint Corp.
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
Verizon, which also announced a small acquisition of the
media assets of Intel Corp 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 Feb. 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.