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Verizon Says Itll Take A Hit from Health Care Reform

Verizon Communications Inc. (VZ) is the second telecom service provider to say it will take a massive charge because of the recent health care reform bill.

Last week, AT&T Inc. (T) said it’ll take a $1 billion hit in the first quarter for because of changes to the Medicare-subsidy tax treatment. Companies say the government money they receive for retirees’ Medicare Part D drug coverage will become taxable in 2011.

Verizon, the second-largest phone company in the United States, made the same claim in a filing with the Securities and Exchange Commission on Thursday. The company said it will take a one-time, non-cash tax charge of about $970 million in the first quarter.

But the question is how much of Verizon and AT&T’s moves are political ploys – both companies donate heavily to Republicans. One analyst, Jonathan Schildkraut at Jefferies & Co., told BusinessWeek that health care reform doesn’t diminish Verizon or AT&T’s standing or capabilities.

“From a corporate perspective, they’re probably disappointed because it takes money out of their coffers,” Schildkraut told BusinessWeek, adding, “this bill doesn’t make Verizon any less well-positioned vis-à-vis cable competitors or AT&T. It doesn’t make AT&T any less well positioned.”

Verizon’s shares closed up .84 percent on Thursday at $31.28.


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