Verizon Communications (NYSE: VZ), the second-largest U.S. phone company, reported a decline in adjusted fourth-quarter profit as smartphone discounts lured a record number of new wireless subscribers.

Fourth-quarter earnings per share excluding some items fell to 38 cents from 52 cents a year earlier, the New York-based company said Tuesday in a statement.

Profit missed the average estimate of 50 cents in a Bloomberg survey of 31 analysts.

Overall, the parent of the country’s biggest wireless carrier lost $4.23 billion, or $1.48 per share, for the period ended Dec. 31. That compares with a loss of $2.02 billion or 71 cents per share, a year ago.

Verizon Wireless, the mobile-phone joint venture with Vodafone Group Plc, added 2.1 million monthly contract users, with 87 percent signing up for smartphones. The company had warned this month that lower prices for handsets such as Apple Inc.’s iPhones to attract users to two-year contracts would cut into profit, along with $1 billion in storm-related costs.

“It’s a big upfront cost on smartphones and a short-term hit,” said Avi Greengart, an analyst with Current Analysis, before the results were announced. “They have to offer enormously expensive phones at affordable prices to move customers onto higher-priced plans.”
More smartphone users watching videos or streaming music and enrolling in shared data plans resulted in a 6.6 percent increase in the average monthly bill for contract users to $146.80. Analysts predicted $147.01, based on an average of seven estimates.

Fourth-quarter sales climbed 5.7 percent to $30 billion. Analysts predicted $29.8 billion, according to data compiled by Bloomberg. The net loss widened to $4.23 billion as Verizon recorded a pretax charge of $7.19 billion for severance and benefit expenses and to adjust the value of pension liabilities.

Speed Lead

Verizon has a one-year lead over AT&T Inc. on the introduction of faster long-term evolution, or LTE, service, leading to more smartphone sales. The Share Everything plan introduced in June, allowing users to share a data plan between as many as 10 devices, has helped Verizon attract heavy wireless Internet users. The increase in wireless revenue helped compensate for slower sales to business and landline customers.

Verizon added 134,000 FiOS TV customers, fewer than the 194,000 gained a year ago. Total operating revenue for the landline division including sales to businesses and FiOS were $9.99 billion, compared with $10.1 billion a year ago.

Verizon climbed 1 percent to $42.54 on Jan. 18. The shares rose 7.9 percent last year.

The company’s stock fell 59 cents to $41.95 in premarket trading Tuesday.

For the year, Verizon Communications earned $875 million, or 31 cents per share. In the previous year it earned $2.4 billion, or 85 cents per share. Annual operating revenue increased to $115.85 billion from $110.88 billion.

Total debt for 2012 declined to $52 billion from $55.2 billion.

Verizon’s report marks the debut for telecommunications companies this earnings season. Rival AT&T Inc. reports on Thursday.

(Bloomberg and The AP contributed to this report.)