IPhone Powers and Pinches Verizon - Wall Street Journal

By GREG BENSINGER

Verizon Communications Inc. swung to a fourth-quarter loss on a large pension-related charge, though it reported a jump in contract wireless subscribers thanks to Apple Inc.'s iPhone.

Verizon said it added 1.2 million of the sought-after wireless contract subscribers, a 38% improvement over a year earlier. That included about 4.3 million iPhone activations and 2.3 million smartphones for its burgeoning fourth-generation mobile broadband network.

Overall, Verizon reported a loss of $2.02 billion, or 71 cents a share, compared with a profit of $2.64 billion, or 93 cents, a year earlier. Excluding the actuarial valuation of Verizon's benefit plans, early debt extinguishment and other items, per-share earnings slipped to 52 cents from 54 cents, and missed the average analyst estimate of 53 cents on Thomson Reuters.

Verizon shares, up 4% over the past three months, fell 2.1% premarket to $37.60.

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Verizon had projected revenue growth throughout the year as the iPhone attracted new subscribers to Verizon Wireless.

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Revenue jumped 7.7% to $28.44 billion, slightly above the $28.39 billion expected by analysts polled by Thomson Reuters.

The carrier has taken an early lead on fierce rival AT&T Inc. in building out a 4G network and today offers it to nearly three times as many Americans. While AT&T was battling to keep its $39 billion bid for T-Mobile USA afloat, Verizon snatched up nearly $4 billion worth of wireless airwaves, or spectrum, from a consortium of cable television providers.

Verizon had projected quarterly revenue growth throughout the year as the addition of Apple Inc.'s iPhone attracted new subscribers to Verizon Wireless, which it owns jointly with Vodafone Group PLC. While the use of smartphones and other wireless devices has flourished, there are fewer new customers up for grabs, leaving carriers to woo customers from their rivals.

Verizon also is expanding its networking and cloud-computing services as it moves to replace its shrinking landline business.

The carrier added 1.5 million total wireless subscribers during the quarter, raising its base to 108.7 million connections, up 6.3% from a year ago. Wireless revenue rose 13% to $18.3 billion. Total churn, or customers who cancel services, was 1.23%, down from 1.26% in the third quarter.

Meanwhile, Verizon's traditional wireline business, which includes fixed telephones and FiOS cable television, continued to contract. Revenue for the unit fell 1.5% to $10.1 billion as more users switch their landline telephones out for mobile phones. Chief Executive Lowell McAdam vowed in a statement to improve wireline margins this year.

The company added 201,000 FiOS Internet and 194,000 FiOS Video subscribers during the quarter, up from 197,000 and 182,000, respectively, a year earlier. Average revenue per user at the wireline business jumped 8.5%.

Operating margin swung to negative 3.9% from 24.3%.

Write to Melodie Warner at melodie.warner@dowjones.com