Verizon quarter hurt by Sandy, pension issues

Shares of Verizon Communications (VZ) rose slightly in morning trading Tuesday even after the telecommunications giant posted quarterly results that disappointed Wall Street. The reaction indicates that the results were not as bad as some had feared.

Verizon posted a fourth-quarter loss of $1.93 billion, or $1.48 per share, versus a loss of $212 million, or 71 cents, a year earlier as pension liabilities and Superstorm Sandy eroded profit. Revenue climbed 5.7% to $30 billion, the highest quarterly increase in 2012 and one fueled by gains in its wireless business. Excluding one-time items, profit was 38 cents, lagging the 50-cent average estimate of analysts surveyed by Bloomberg News. Revenue beat expectations of $29.83 billion.

As the wireless market continues to mature, companies are finding it increasingly difficult to maintain their competitive edge. Though Verizon Wireless added 2.2 million net customers in the fourth quarter, they came at a steep price: Most signed up for smartphones, devices the company heavily subsidizes.

Earlier this month, Verizon warned that the costs associated with providing two-year service contracts to Apple (AAPL) iPhone customers would hurt profit. The company activated 6.2 million iPhones in the quarter.

"They have to offer enormously expensive phones at affordable prices to move customers onto higher-priced plans," Avi Greengart, an analyst with Current Analysis, told Bloomberg.
 
During the quarter, Verizon added 44,000 FiOS net Internet and 134,000 FiOS Video net additions. A year earlier, Verizon added 194,000 FiOS TV customers. Wireline operating revenues fell 1.5% to $10 billion. Retail churn, a measure of how many customers drop the service, was 1.24% in the fourth quarter, up 1 basis point. Capital expenditures were $16.2 billion in 2012, little changed from a year earlier despite added costs from Sandy.

--Jonathan Berr does not own shares of the listed stocks.  Follow him on Twitter @jdberr.

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