Strike to pressure Verizon earnings; Q1 net income meets estimates

(Reuters) - Verizon Communications Inc said an ongoing strike by its wireline workers was expected to hurt earnings in the current quarter, even as it reported first-quarter net income that met analyst expectations amid strong tablet sales.

Shares of Verizon, the No. 1 U.S. wireless carrier, fell 3.4 percent to $49.99 at midday on Thursday.

If the strike, now in its second week, continues for an extended period of time, it could pressure full-year earnings, Chief Financial Officer Fran Shammo said in an interview.

“We’d like to settle this sooner than later,” Shammo said.

About 40,000 employees of Verizon’s wireline business, which includes its Fios Internet, telephone and TV services, went on strike after reaching an impasse in talks over a new labor contract. Issues include healthcare, offshoring of call center jobs, temporary job relocations and pensions.

In the wireline business, consumer revenue of $4 billion was little changed from a year ago.

Net income attributable to the company rose to $4.31 billion, or $1.06 per share, in the first quarter, meeting analysts’ expectations.

The company stood by its full-year profit forecast.

Verizon has been scaling back its Fios TV and Internet business, which represented about 29 percent of its 2015 revenue.

“Rather than investing in good jobs here at home, Verizon refuses to make Fios available to thousands of people ... throughout the East Coast and is embarking on a questionable path to acquire troubled Yahoo and other companies,” Brooklyn-based Verizon field technician Anthony Finocchio, said in a statement on Thursday.

To tap new revenue, the company has shifted its focus to the advertising-supported Internet business and acquired AOL last June for $4.4 billion. It is seen as the front-runner in bidding for Yahoo Inc’s core Internet business.

The company, known for its high-quality network, is locked in a battle for subscribers with competitors in the saturated U.S. wireless market. Smaller rival Sprint Corp has been offering half-off discounts, and T-Mobile US Inc has launched free music and video-streaming plans.

Verizon reported strong subscriber net additions for the first quarter ended March 31, adding 640,000 wireless retail postpaid subscribers, helped by tablet promotions during a seasonally slow period for phone upgrades. That surpassed analysts’ average estimate of 480,000, according to market research firm FactSet StreetAccount.

Customer defections, or churn, in Verizon’s wireless postpaid business, dropped to 0.96 percent from 1.03 percent a year earlier.

Total operating revenue rose 0.6 percent to $32.17 billion, falling slightly short of analysts’ average estimate of $32.46 billion, according to Thomson Reuters I/B/E/S.

Reporting by Malathi Nayak in New York and Sai Sachin R in Bengaluru; Additional reporting by Kshitiz Goliya in Bengaluru; Editing by Bernadette Baum