NEW YORK (AP) — Verizon Communications Inc. will give an indication of how many new subscribers it is luring with the new iPhone when it reports its fourth-quarter results before the stock market opens Tuesday.
WHAT TO WATCH FOR: The quarter saw the launch of the iPhone 4S on Oct. 14, and Verizon has already said it sold 4.2 million of them. Verizon, the nation’s largest wireless carrier and second-largest telecommunications company, started selling the iPhone 4 less than a year ago, so there may have been many holdouts waiting for the new model.
The question is how many of those iPhone buyers were new to Verizon. Since nearly everyone has a phone already, the days of easy growth are over for cellphone companies, and they’re now sniping subscribers from each other. Verizon has done well in this game, making the biggest carrier even bigger.
Analysts expect that Verizon added just over a million net subscribers on contract-based plans in the quarter, up from 872,000 a year ago.
Selling lots of iPhones doesn’t help Verizon in the short term. On the contrary, high smartphone sales reduce earnings, because the carrier subsidizes each phone by hundreds of dollars to put it in customers’ hands for $199. It counts on making back the money through service fees over the life of a two-year contract.
In any case, Verizon is set to post a multi-billion dollar loss for the quarter, because it’s taking a $5 billion to $6 billion non-cash charge for the change in the value of its pension plans.
In early December, Verizon struck a deal with four major cable companies. It will buy wireless spectrum from them, and they’ll resell Verizon’s wireless service to their customers. Verizon will resell cable service in its wireless stores, even though it competes in some areas with its own FiOS service. The deal might hit snags in Washington, and analysts will be listening on the post-earnings conference call for details.
Though Verizon Wireless is a big growth engine, only 55 percent of its earnings flow through to New York-based Verizon Communications. The rest of the wireless division is owned by Vodafone Group PLC of Britain.
WHY IT MATTERS: Verizon Wireless had 107.7 million wireless devices on its network and 24.5 million landlines at the end of the last quarter. The stock is a component of the 30-stock blue-chip Dow Jones industrial average.
Verizon’s report is the opening shot for telecommunications companies this earnings season. Rival AT&T Inc. reports on Thursday.
WHAT’S EXPECTED: Analysts polled by FactSet on average expect Verizon to report earning 53 cents per share on revenue of $28.4 billion. Their earnings estimate excludes the charge to the value of its pension plans.
LAST YEAR’S QUARTER: Verizon reported a profit of 93 cents per share for the fourth quarter of 2010, but that figure included a major adjustment in the value of its pension plans. Excluding items, earnings were 54 cents per share. Revenue was $26.4 billion.