Discounted Smartphones Result To Lower Earnings For Verizon Communications

Discounted Smartphones Result To Lower Earnings For Verizon Communications

The adjusted profit for the fourth quarter of Verizon Communications (NYSE: VZ) went down even as the company attracted numerous wireless subscribers due to discounts given to smartphones.

Verizon Communications revealed that earnings for the fourth quarter went down from $0.38 from the $0.52 in the same period a year ago. The profit was lower than the $0.50 average estimates of analysts. Around 2.1 million contract users were added by the second-biggest mobile phone company in the US. Around 87 percent of the new subscribers were smartphone users.

Earlier in the month, Verizon Communications indicated that its profit will suffer from the lower smartphone prices in an attempt to increase their appeal to subscribers who will sign up for a new two-year service contract.

Customers are enticed to sign up for high-end plans by offering expensive smartphones at low price tags. The average bill of contract users has increased by 6.6 percent due to the increasing number of customers streaming music or watching videos on the smartphone.

Sales for the fourth quarter increased to $30 billion or by 5.7 percent although the net loss of the Verizon Communications increased to $4.23 billion following the inclusion of the $7.19 billion pretax charge for pension liabilities adjustments and benefits expenses.

Verizon Communications is still ahead of AT&T (NYSE:T) as it introduced the long term evolution of the LTE service a year ahead of AT&T. The introduction of the LTE service allowed Verizon Communications to increase its smartphone sales.

The company has increased the number of heavy users of wireless internet following the introduction of its Share Everything plan last June. Slow landline and business client sales were offset by the increase in revenue in the wireless services offered by Verizon Communications.

The total revenue of Verizon Communications in its landline division went down from $10.1 billion to $9.99 billion.

Shares of Verizon Communications closed higher at $42.54 or by 1 percent last January 18.

Posted by James Fried on Tuesday January 22 2013, 11:44 AM EST. Ref: Bloomberg. Link. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0