Verizon Q1 Profit Down on Health Care Charge; CFO Still Bullish on Postpaid
Verizon Q1 profit plunged 75 percent from a year earlier to $409 million due to a $970 million one-time health care charge. The carrier added fewer postpaid customers but still expects growth in the postpaid market, Chief Financial Officer John Killian said on a conference call Thursday.
The carrier added 1.5 million net new wireless customers during the quarter for 92.8 million total. Like AT&T (CD April 22 p8), Verizon added fewer postpaid customers, with 432,000 net additions. But the company still believes there’s strength in postpaid, Killian said. A strong smartphone lineup combined with differentiated services like Skype Mobile will continue to attract and retain high-value customers, he said. “We are still very bullish about growth opportunities in the postpaid market.” Slowing postpaid growth raises “profound strategic questions of where you go for growth in this industry,” said Bernstein Research analyst Craig Moffett. The slowdown means the company would have to push more than ever to expand the revenue it receives from each customer, Christopher Larson of Piper Jaffray said.
Regarding a potential deal with Vodafone, Killian said cross-border transactions are often complex and haven’t been historically successful, even if there could be a few benefits to buying out Vodafone’s stake at the right price. “We are not convinced there’s industrial logic behind putting the two companies together,” he said. Verizon Wireless will continue to emphasize its smartphones, including Google’s Android phones, Killian said. Several different devices are coming, including the HTC Incredible, he said. For the first time, the carrier revealed that it has 7.3 million “other” wireless connections, including machine-to-machine, e-readers and telematics. It didn’t say how many connections it added last quarter.
As usual, Verizon saw an ongoing decline in legacy phone lines: It had 17.9 million total residential access lines in service as of the end of March, down 12 percent year-over-year. The telco’s FiOS TV subscribers topped 3 million by the end of the quarter. Still, FiOS’ rate of growth has slowed: The company added 185,000 net new FiOS Internet customers and 168,000 net new FiOS TV customers, down from 298,000 and 299,000, respectively, in the year-ago quarter. The company’s key focus will be cost reduction in the wireline unit, including job cuts, Killian said. Verizon cut 2,300 jobs in Q1 as part of its previously announced plan to cut about 13,000 jobs this year.