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 said.
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 February 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,"
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.
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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
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.
(Reporting by Sinead Carew; editing by
Jeffrey Benkoe, Bernadette Baum and Marguerita Choy)
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