(FROM THE WALL STREET JOURNAL 1/23/15)
By Chelsey Dulaney and Ryan Knutson
Verizon Communications Inc. added 2 million of the wireless
industry's mainstream customers in the final three months of the
year, but its profitability took a hit as competition for
subscribers heated up.
The country's largest wireless carrier said its wireless
operating margin fell six percentage points from a year earlier to
23.5% due to price discounts and higher costs from resigning
customers. The drop came amid intense competition in the U.S. with
rivals such as T-Mobile US Inc. and Sprint Corp. offering deals and
paying subscribers to switch to their services.
Industry leaders Verizon and AT&T Inc. have been forced to
respond with costly moves that have put pressure on their earnings.
Meanwhile, the carriers have been squeezed on the cost side by
soaring prices for wireless spectrum, developments that have
concerned investors. Verizon's stock fell 45 cents to $47.80 amid a
broadly higher market on Thursday.
Verizon said there is a limit to how much it will fight for
customers even as the rate at which it lost subscribers ticked
higher.
"We did not go to places where we did not financially want to go
to save a customer," Chief Financial Officer Fran Shammo said
Thursday on a conference call with analysts. "And there's going to
be certain customers who leave us for price and we are just not
going to compete with that because it doesn't make financial sense
for us to do that."
Overall, Verizon posted a loss of $2.23 billion, compared with a
profit of $5.07 billion a year earlier, with pension losses
weighing heavily on the most recent quarter, and pension gains
affecting the 2013 result. Excluding those results, Verizon's
earnings were in line with Wall Street expectations.
Revenue increased 6.8% to $33.2 billion.
Verizon is the first big wireless carrier to report results for
the fourth quarter, which analysts have said will be challenging
because of aggressive holiday promotions amid a largely saturated
market.
For growth, Verizon and its rivals have leaned heavily on adding
wireless accounts for tablets. Those accounted for 1.4 million of
the carrier's 2 million net retail postpaid additions in the
quarter. Postpaid phone additions were 672,000, as 4G smartphone
additions were offset by declines in other smartphones.
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