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Pension Costs, iPhone Weigh on Verizon's Bottom Line

By Josh Long
January 24, 2012 - News

Verizon Communications Inc. on Tuesday reported continued growth in its wireless business, but non-cash pension charges and the cost of subsidizing Apple's iPhone weighed down its fourth-quarter earnings.

The New York-based telecommunications company reported a loss of 71 cents diluted earnings per share, versus earnings of 93 cents per share in the year-ago quarter. Verizon said the loss reflected non-cash pension items.  

Operating revenues climbed 7.7 percent year over year to $28.4 billion on a consolidated basis, thanks to continued growth at Verizon Wireless, the largest mobile operator in the United States. Wireless revenues grew 13 percent to $18.3 billion as Verizon Wireless added 1 million connections to end the year with 108.7 million total connections.

Verizon Wireless sold 7.7 million smartphones in the fourth quarter, including 4.2 million iPhones, according to CNNMoney, which reported that the cost of subsidizing Apple's device impacted its profits. Verizon Wireless' segment EBITDA (earnings before interest, taxes, depreciation and amortization) margin on service revenues fell 530 basis points from the year-ago quarter to 42.2 percent.

Seventy percent of Verizon Wireless' postpaid phone sales were smartphones, and the wireless giant sold 2.3 million 4G LTE devices.

Landline Voice Losses Improve

Verizon's wireline business shrunk. Operating revenues declined 1.5 percent year over year to $10.5 billion.

But for the first time in years, Verizon reported that the persistent decline in its landline voice connections slowed year over year.

Total voice connections, which includes Verizon's FiOS digital voice connections and traditional switched access lines, fell 7.2 percent to 24.1 million. That represented the smallest year-over-year decline since the first quarter of 2006, the company said. For several years, Americans have been ditching traditional phone lines in favor of such alternatives as mobile and Internet-based phone service.

The number of broadband connections climbed 3.3 percent to 8.7 million, thanks to FiOS subscriber gains. Verizon added 201,000 FiOS Internet connections and 194,000 FiOS video connections. Verizon ended the year with 4.8 million FiOS Internet and 4.2 million FiOS television connections.

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