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Verizon Takes Big Profit Hit From Benefit Costs

Verizon
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Verizon

Verizon shares dropped after the company reported a fourth-quarter loss per share of $1.48 due primarily to employee benefit costs.

Excluding-items the company said fourth-quarter earnings per share were 38 cents.

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Analysts had expected the company to report earnings excluding items of 52 cents a share on $29.75 billion in revenue, according to a consensus estimate from Thomson Reuters.

The company reported progress in its efforts to increase FiOS Internet connections, with 134,000 new connections in the quarter, bringing the total to 5.4 million FiOS Internet and 4.7 million FiOS video connections, representing growth of 12.6 percent and 13.3 percent respectively.

"FiOS is an excellent product," James Ratcliffe, telecom analyst at Barclays, told CNBC's "Squawk Box." "[But] the long-term returns on the FiOS business are still up for debate."

Ratcliffe has an equal weight on Verizon stock, saying, "There's some upside to it."

"Verizon seized growth opportunities in the fourth quarter to cap a year of solid progress across the entire business," Lowell McAdam, Verizon chairman and CEO, said in a statement.

The company attributed the loss to non-operational items in part due to the effects of Superstorm Sandy but more so because of a $1.55 per share charge related to severance, pension and benefit costs and pension liabilities.

Operating margin at the telephone company's wireless business, which accounts two-thirds of total revenue, rose slightly to 24 percent.

Verizon and other mobile services providers subsidize smartphones for new customers and as a result are facing margin pressure due to rising costs.

Wireless services revenue for the fourth quarter grew 8.5 percent to $16.4 billion, while retail service revenue jumped 8.4 percent to $15.8 billion.

Verizon Wireless, the company's mobile venture with Vodafone Group, is the biggest U.S. mobile service provider.

Verizon Wireless said in November it would pay a total dividend of $8.5 billion to its two parent companies.

Capital spending for the year was $16.2 billion, including $135 million related to Sandy recovery efforts, and was in line with 2011 spending.

Like rivals AT&T and Sprint Nextel, Verizon is spending billions of dollars to upgrade its network to support booming demand for services like web surfing and video on smartphones like Apple's iPhone.

Verizon's loss compared with a loss of 71 cents per share a year earlier, when it posted a loss of about $212 million.

-The Associated Press contributed to this report.

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