Verizon Tops Analysts’ First-Quarter Profit Estimates

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Breaking Down Verizon’s Earnings

Verizon Communications Inc., the largest U.S. wireless carrier, exceeded analysts’ first-quarter profit estimates as consumers jumped at free tablet promotions, even as it lost wireless phone users.

Earnings were $1.02 a share, the New York based company said in a statement. That compares with the 95-cent average of estimates compiled by Bloomberg. Sales rose to $32 billion, missing analysts’ projections of $32.3 billion.

While tablet offers helped Verizon lure 565,000 new monthly subscribers, it lost 138,000 phone users. The battle for customers with small rivals like T-Mobile US Inc. continues a challenging industry trend. Verizon’s average monthly phone bill was $156.14, less than the $159.15 average estimate. Competitive pressure leaves Verizon having to balance two options -- profit and market share, according to Jonathan Chaplin, an analyst with New Street Research.

“If Verizon continues to hold pricing, subscriber estimates have to come down; if they maintain subscribers, it will be at lower prices,” Chaplin wrote in a note.

Verizon shares fell 0.4 percent to $49.17 at the close in New York. While the stock dropped 4.8 percent last year, it has gained 5.1 percent since the beginning of this year.

Battle for Customers

Verizon’s new monthly subscribers fell short of the 587,000 average estimate of five analysts surveyed by Bloomberg. AT&T Inc., which posts earnings on Wednesday, added 400,000 new monthly subscribers in the first quarter, based on the survey. T-Mobile, whose quarterly report is expected in May, probably added 930,000.

On Feb. 5, Verizon announced $15.6 billion in deals to sell assets. Frontier Communications Corp. agreed to pay more than $10 billion for Verizon landline operations in three states. American Tower Corp. is paying $5 billion for rights to 11,324 Verizon wireless towers. Proceeds from the sales will help Verizon pay for the $10.4 billion purchase of airwaves at a U.S. auction in January.

For the first quarter, Verizon reported net income of $4.34 billion, or $1.02 a share, down from $6 billion, or $1.15, a year earlier.

Verizon added 133,000 FiOS Internet subscribers and 90,000 FiOS TV customers in the first quarter compared with 98,000 Internet and 57,000 TV users a year earlier.

FiOS Custom

On Sunday, Verizon started selling smaller, selected channel packages called FiOS Custom TV, the company’s first attempt at so-called skinny bundles. The $74.99 service includes Internet, phone and a core of network channels that comes with an option to add two additional channel packages.

FiOS customers can also add other channel packs like sports, which includes ESPN and Fox Sports, or lifestyle that has Bravo and A&E. The move is a response to challengers like Dish Network Corp.’s 20-channel for $20 Sling TV service that streams live shows to TVs, tablets and phones.

People want choice and the company is trying to give them what they want, Verizon Chief Financial Officer Fran Shammo said in a phone interview today.

“Young people, families, seniors all have different interests,” he said. “This give you an ability to reprice your service.”

(An earlier version was corrected to show that profit topped analysts’ estimates.)

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