Record Smartphone Sales Cut Into Verizon's Profit

By Craig Galbraith Comments
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**Editor's Note: Click here to see how some of the biggest names in communications fared in Q3 2012.**

As expected, Verizon reported sharp fourth-quarter losses Tuesday thanks primarily to a one-time charge related to pension plans. The net loss was $4.23 billion.

On the good news, bad news front, Verizon Wireless confirmed a previous announcement that it had broken a record for smartphone sales in Q4 2012 – with 87 percent of its new, 2.1 million postpaid customers buying the high-tech devices – however, all of those smartphone sales lead to less profit per gadget since the carrier is forced to subsidize them to make them affordable. That resulted in the company missing earnings estimates.

“It’s a big upfront cost on smartphones and a short-term hit," Current Analysis' Avi Greengart said before the results were announced, according to Bloomberg. “They have to offer enormously expensive phones at affordable prices to move customers onto higher-priced plans."

The iPhone was Verizon's biggest seller among smartphones during the holiday season, selling 6.2 million units last quarter, about double its sales in Q3.

Overall, Verizon saw service revenues rise 8.5 percent over the same quarter in 2011. The increases continue to make up for the declining wireline side of Verizon's business. The company added 134,000 subscribers for its FiOS TV service, down from nearly 200,000 in Q4 2011.

Hurricane Sandy was responsible for another $1 billion in losses, Verizon said.

After dipping in early trading Tuesday, Verizon shares were up a little less than 1 percent, at $42.90, as of 12:12 p.m. ET.

Follow senior online managing editor @Craig_Galbraith on Twitter.

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