Verizon 4Q Profit Disappoints on Costs, Tighter Margins

By FOXBusiness

Hurt by a sharp increase in smartphone demand that squeezed profit margins, Verizon Communications (NYSE:VZ) swung to a loss in the fourth quarter, though new wireless additions helped boost demand for pricey data plans.

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The New York–based phone, TV and Internet provider reported a loss of $212 million, or 71 cents a share, compared with a year-earlier profit of $4.65 billion, or 93 cents a share.

Excluding special non-cash pension items, the company earned 52 cents, which is just below average analyst estimates of 53 cents in a Thomson Reuters poll.

Investors seemed unimpressed, sending its shares down more than 2%.

Verizon, which subsidizes the cost of every smartphone order to encourage two-year contracts, saw some of its robust margins chipped away surging demand for Apple’s (NASDAQ:AAPL) next generation iPhone.

The percentage of Verizon Wireless customers using smartphones climbed to 44% from 39% in the third quarter.

The record revenue for the three-month period was $28.4 billion, virtually matching the Street’s view. The gains were led by a 13% improvement to $18.3 billion in total wireless revenue, a venture it shares with Vodafone (NYSE:VOD) and new FiOs subscribers.

“Wireline margins recovered from third-quarter pressures, and we expect wireline margin expansion in 2012,” Verizon CEO Lowell McAdam said in a statement.

Sales from data plans grew 19.2% to $6.3 billion during the period with the help of 1.5 million retail net additions, the largest increase in three years, while 201,000 people joined FiOS Internet and 194,000 subscribed to FiOS Video.

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