* 4th qtr EPS 38 cents vs Street view 50 cents
* 4th qtr revenue $30.05 bln vs view $29.83 bln
* Wireless margin 41.4 pct vs 42.2 pct year ago
* Says could buy back shares at any time
* Eyes $2 billion in wireless cost cuts
By Sinead Carew
Jan 22 Verizon Communications Inc posted
a weaker-than-expected wireless operating profit margin due to
hefty costs from smartphones like Apple's iPhone, but the U.S.
telephone company promised a big improvement this year as it
While Verizon's fourth-quarter bottom line was weaker than
anticipated, investors were encouraged when Chief Financial
Officer Fran Shammo said on Tuesday that the company could be in
a position to buy back shares sooner than expected and that
wireless margins could rise this year to as high as 50 percent.
Shammo said the numbers will be helped by $2 billion in cost
cuts at Verizon Wireless, Verizon's mobile venture with Vodafone
Group Plc, on top of $5 billion in cuts there in the
last three years.
The cuts at Verizon Wireless - the biggest U.S. mobile
service provider - will not require extensive layoffs and will
come in areas such as call center consolidation and increased
efficiency in logistics, Shammo told Reuters.
Shammo also hinted that Verizon may not have to wait until
the end of 2013 to buy back shares as he had previously
indicated, thanks to the strength of its balance sheet.
"We could do share buybacks at any point in time right now,"
he told analysts, without giving a specific time frame.
Verizon shares were up 0.6 percent at $42.80 on Tuesday
But while some analysts were impressed with the 2013 margin
target, others questioned whether it is realistic, considering
the prospect of stiffer competition from rivals. Pivotal
Research Group analyst Steve Sweeney said the target is
Softbank Corp is seeking to buy 70 percent of No. 3
U.S. mobile service provider Sprint Nextel Corp, and
Sprint is looking to buy out Clearwire Corp. Also, No.
4 U.S. mobile service T-Mobile USA, a Deutsche Telekom AG
unit, is merging with rival MetroPCS Communications
"2013 will have a much different competitive landscape,"
Sweeney said in a research note. "Both new entities will be
larger and better capitalized companies than they were in 2012
and represent incremental competition for both Verizon and
Verizon Wireless reported a fourth-quarter service profit
margin of 41.4 percent based on earnings before interest, taxes,
depreciation and amortization, compared with analyst hopes for
42 percent, and with 42.2 percent in the year-ago quarter.
The lower fourth-quarter margin was due to
higher-than-expected subsidies paid to smartphone makers such as
Apple Inc so that Verizon Wireless could offer a phone
discount to customers who sign a long-term contract. Rival AT&T
Inc has also warned that high smartphone sales hurt its
wireless profit margins because of subsidies.
While Shammo was bullish about the wireless business and
Verizon's FiOS home Internet and television services, he warned
that the best he could hope for in the company's enterprise
business is that 2013 revenue and profit margins stay flat with
2012 because of a lack of clarity on U.S. economic issues.
"In Enterprise, we still see uncertainty around the debt
ceiling, deficit reduction, and tax reform," Shammo told
analysts on a quarterly earnings conference call where he also
cited worries about international economic growth.
The company's fourth-quarter net loss widened to $4.23
billion, or $1.48 per share, from a loss of $2.02 billion, or 71
cents per share in the year-ago quarter.
Excluding unusual items such as the charge from Superstorm
Sandy and pension liabilities, Verizon would have earned 45
cents per share, well below Wall Street expectations of 50 cents
per share, according to Thomson Reuters I/B/E/S.
Operating revenue rose 4.5 percent to $30.05 billion,
compared with expectations of $29.83 billion, according to
Thomson Reuters I/B/E/S.
Capital spending for the year was $16.2 billion, including
$135 million related to Sandy recovery efforts, and was in line
with 2011 spending. Shammo said he expects 2013 capital spending
to be flat with 2012.
Verizon said it added 144,000 net customers to its FiOS
high-speed Internet service and 134,000 net FiOS TV customers in
the quarter. It had already announced 2.1 million net additions
of wireless contract customers in the fourth quarter.
AT&T, The No. 2 U.S. mobile service provider, is set to
report results on Jan. 24 and Sprint is due to report Feb. 7.