Verizon had previously issued a warning that the phone’s subsidies would cut into its profit. The company is focusing on getting more subscribers in hopes that they will become more profitable as smartphone models become cheaper from intensifying price competition. As Chief Financial Officer Fran Shammo said, “We made a concerted effort to go after more business in wireless. As a result, we posted historical net subscriber additions.”
Once the market has a wider range of smartphones available and manufacturers have to compete harder for maintaining or increasing their market share, they will be forced to cut prices, meaning Verizon’s subsidy costs should also go down. Verizon CFO Fran Shammo also stated, “It’s the same thing we saw with basic phones: The more competition there is, the more prices come down.”
Verizon Communications, the second largest U.S. phone company, missed its profit estimates after a record number of new wireless subscribers brought along a higher number of smartphone subsidies. Although analysts had estimated earnings of an average of 50 cents per share during the fourth-quarter of 2012, the actual profit was 45 cents a share. Also, Verizon’s sales during the fourth quarter rose nearly 6% to $30 billion, a number much in line with the $29.8 billion forecasted by analysts, yet its net loss was more than $4 billion. This was largely caused by a pretax charge of more than $7 billion to cover benefit expenses and severance, as well as an adjustment in the value of pension liabilities.
Telecoms and Video
Verizon Communications and Coinstar are launching Redbox Instant, a venture that offers online streaming movies to Redbox DVD customers.
Coinstar saw its biggest fall in over six months after the owner of Redbox DVD kiosks commented that a lackluster film lineup will cause results to miss analysts’ estimates this quarter. Coinstar dropped 7% on February 7 after the company released its fourth-quarter earnings and its first-quarter forecast. According to the company’s Chief Financial Officer Scott Di Valerio, “Fewer new releases on DVD will diminish sales and profit this period.” He also noted that the company “needs to bring back customers who stopped renting during the third quarter, when content also was weak.”
Across the pond, BT Group rolled out a 2.5 billion-pound ($3.95 billion) fiber-optic project for faster Web access and expanded its TV offers to counter declining sales in traditional phone services. The London-based former phone monopoly lured 60,000 subscribers for YouView, its video-on-demand service which started in October. YouView allows TV viewers to catch up on the latest episodes of their favorite shows from the British Broadcasting, ITV (ITV), Channels 4 and 5, before the next episode airs.
This summer, BT Group is set to release its new sports channel, featuring rugby matches and Premier League soccer. BT Group Chief Executive Officer Ian Livingston said, “Our fiber plans are helping to make the U.K. a broadband leader in Europe. This gives us an excellent platform for our push into TV and sport later this year.”
BT Group results
BT Group’s adjusted EBITDA inched up 1.6% to 1.55 billion pounds ($2.5 billion) for the third quarter ended Dec. 31, beating analysts’ average estimate of 1.53 billion pounds ($2.416 billion’) although revenue, excluding the effect of a regulatory decision, decreased 6% to 4.51 billion pounds ($7.124 billion), and matched the analysts’ average estimate. BT Group expects revenue will improve in the second semester as compared with the fiscal first half.