Verizon Shares Fall 4% on Earnings Miss

The subscriber growth of rivals T-Mobile and Sprint, which offer unlimited data plans, is creating "a competitive challenge" for Verizon.
Matthew HellerJanuary 24, 2017
Verizon Shares Fall 4% on Earnings Miss

Verizon Communications’ fourth-quarter profit and subscriber growth missed analysts’ expectations amid increasing competition from wireless rivals such as T-Mobile and Sprint.

The largest U.S. wireless provider on Tuesday reported adjusted earnings of 86 cents per share, down from the 89 cents per share in the same quarter last year. Analysts had expected 89 cents per share, according to S&P Global Market Intelligence.

Verizon’s added 591,000 net subscribers, bringing its total to 114.2 million, up 1.9% over 2015. But Wall Street analysts had predicted 726,000 net additions.

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CFO Matt Ellis said the company’s 167,000 phone subscriber additions were strong. “The biggest area where people were probably off was tablets,” he told Reuters. “We didn’t run as many tablet promotions this quarter.”

But customer defections among Verizon’s wireless retail customers who pay bills on a monthly basis increased to 1.10% of total wireless subscribers, compared with the average analyst estimate of 1.05%.

T-Mobile and Sprint, which offer unlimited data plans, continue to make wireless gains, creating “a competitive challenge” for Verizon, said Dave Heger, a senior equity research analyst with investment firm Edward Jones. T-Mobile, for instance, added about twice as many subscribers, 1.2 million, in the fourth quarter as Verizon did.

“There’s no question T-Mobile is picking up market share” in the “tough competitive environment,” Heger told USA Today. “You may even have Sprint regaining some share, too, as they become more aggressive.”

Verizon also reported that operating revenue fell 5.6% in the fourth quarter to $32.34 billion. For 2017, the company expects revenue “fairly consistent” with that of 2016, which was about $126 billion, down 4.3%.

On news of the earnings, Verizon’s shares fell 4.4% on Tuesday to $50.12. The stock is down more than 10% over the past six months.

“We are positioning Verizon for future growth and continued sustainable shareholder value,” CEO Lowell McAdam said in a news release. “In the fourth quarter we expanded our customer base in highly competitive wireless and broadband markets.”

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