Verizon Q4 Profit Soars; Short-term Impact of Net Neutrality Order Unlikely, CEO Says
Helped by wireless growth, Verizon Communications posted a Q4 net income of $4.6 billion, nearly doubling its Q4 2009 profit of $2.4 billion. Meanwhile, most of the impact from the FCC’s net neutrality order “won’t be felt this year,” CEO Ivan Seidenberg said during a conference call Tuesday. The rules don’t sound “anywhere near troublesome” but there would be longer term impact if the FCC exercises its authority, he said. “We need to challenge the authority” over the long term, he said. MetroPCS followed Verizon in suing the FCC over net neutrality rules (see separate story in this issue).
Sign up for a free preview to unlock the rest of this article
Communications Daily is required reading for senior executives at top telecom corporations, law firms, lobbying organizations, associations and government agencies (including the FCC). Join them today!
Growth in 2011 would come from doubling the percentage of smartphone customers, Chief Operating Officer Lowell McAdam said. Wireless is contributing more than half of the group revenue, as the wireline business continues to suffer, he said. He expects data usage to go up as more customers purchase smartphones. The carrier added 995,000 total wireless customers in the quarter, including 872,000 postpaid, down from 1.1 million from the year-ago quarter. At the end of Q4, the company had a total of 102.2 million connections, which included 94.1 million wireless subscribers and 8.1 million other connections like machine-to-machines and telematics applications.
Executives didn’t offer projections for iPhone sales because the company is unsure about demand for the device and supply from Apple and its component providers. But the company will “probably do better than most people think” regarding iPhone sales, Seidenberg said. The company is prepared for a possible deluge of data from new iPhone customers, Chief Financial Officer Fran Shammo said. It has also been doubling 3G capacity for its network every year, McAdam said. The 3G network has been and will continue to be a growth engine in 2011 and for some years to come, he said. The addition of iPhone and the heavy subsidy that Verizon will pay to offer the device to new customers will cut into profits, Shammo said, but Verizon still expects to maintain profit margins in the 47 percent range.
Meanwhile, Verizon sold 65,000 LTE dongles in the first three weeks after the LTE launch, 41 percent of which went to new customers, Shammo said. It also sold 86,000 tablets in the quarter, 36,000 of which were standalone iPads. Of the tablet buyers, 96 percent were new to the category, Shammo said. The company reiterated plans to expand its LTE network to 140 markets by the end of 2011. LTE would also help the Verizon Wireless/Vodafone partnership, executives said. It’s been difficult to “reach across the aisle” because of technology differences over the years, McAdam said. The companies are transitioning from a financial partnership to an operational partnership, he said. But now that the companies are moving toward LTE, more commonalities are emerging, he said, noting opportunities to align roadmaps and develop strategies to serve multinational customers. The company will discontinue the $15 data plan for smartphones that offers 150 MB per month at the end of the month, Shammo said.
The fourth quarter saw Verizon add 197,000 net new FiOS Internet customers and 182,000 net new FiOS TV customers. By year-end, Verizon had 4.1 million FiOS Internet and 3.5 million FiOS TV customers. FiOS is becoming more profitable, Shammo said. Verizon now has some 8.4 million broadband customers. Residential access line losses continued as the operator reported a 9.5 percent year-over-year decline to some 14.1 million home landlines. Business lines declined 6.3 percent during the same period to 11.7 million.