Verizon Communications Inc. (NYSE: VZ) on Tuesday said it attracted more than half a million smart-phone subscribers in the latest quarter, showing strength even before it starts selling the iPhone in February.
Verizon Wireless added 872,000 subscribers on contract-based plans, well above analyst expectations of about 650,000. Contract-based subscribers are the most lucrative, and Verizon said three-quarters of the new subscribers bought smart phones, which come with added data fees.
Verizon reported net income of $2.64 billion, or 93 cents per share, for the last three months of 2010. That’s up from $617 million, or 22 cents per share, a year ago, but the increase was mainly due to adjustments for the value of the company’s retirement plans.
Excluding items, earnings were 54 cents per share, a penny shy of estimates by analysts surveyed by FactSet.
“Verizon ended 2010 with strong results, driven by solid execution across all our businesses,” said Verizon Chairman and Chief Executive Officer Ivan Seidenberg in a statement.
“The fourth quarter capped a strong second half of the year, resulting in improved earnings, solid momentum and an even stronger balance sheet. Verizon Wireless produced another quarter of impressive growth, with record-high profitability, as we continue to drive higher smartphone adoption and data use. Following another solid quarter in our wireline businesses, we are optimistic about opportunities to continue to expand wireline margins.”
Revenue fell 2.6 percent to $26.4 billion from $27.1 billion and also just below analyst estimates of $26.5 billion. Verizon sold off landlines in outlying areas last summer, reducing revenue compared to last year.
Its shares slipped 29 cents to $34.95 in pre-market trading.
Two weeks ago, Verizon announced that it would start selling Apple Inc.’s iPhone on Feb. 10, ending years of speculation. AT&T Inc.’s exclusive hold on the phone has left Verizon well behind in attracting smart-phone subscribers, but it now hopes to catch up. Analysts believe it could sell anywhere from 5 million to 13 million iPhones this year.
Verizon announced last week that it was changing how it accounts for the value of the plans that cover pensions and retiree health care. Instead of looking at their performance once a year and then amortizing any gains or shortfalls over several years, as has been standard practice. Verizon will adjust its results full every year to account for the plans.
The change also had the effect of allowing Verizon to adjust past earnings to reflect changes in the value of the pension plans. It had accumulated $20.2 billion in losses from the plans that were going to weigh on future earnings, but the maneuver allowed it to move those losses into the past.
In making the change, Verizon was following in the footsteps of AT&T, which moved $17 billion from future losses to the past. Analysts believe other companies with substantial retiree benefit plans may follow suit, allowing them to move the dismal fund returns of 2008 into the past.
AT&T, Verizon’s chief rival in the wireless business, reports fourth-quarter results on Thursday.
Read the Verizon earnings report here.
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