Verizon reports loss in Q4, net subscribers increase the most in three years thanks to record iPhone sales
Its overall 7.7 million smartphone additions fell a bit short of expectations, so the 1.2 million postpaid subscribers it added were mainly due to doubling the iPhone 4S units sold to over four million, compared to the previous quarter.
The carrier still logged a loss of $2.02 billion because of one-time pension plan revaluation charge of $3.4 billion, but also thanks to the large susbsidies it shells out for all those iPhones. The carrier is, of course, hoping to recuperate the initial investment over the life span of a typical contract, which brings about $2000 to it on average.
One of the expected, but still interesting developments is the huge spike in data revenues - the carrier raked in $6.3 billion of data revenue, representing roughly 42% of its total.
This only shows the growing importance of data for carriers, with the traditional channels like voice and especially text with its huge margins, likely to get less and less important down the road. Verizon now stands at 108.7 million total subscribers.
source: VZW & Bloomberg
- 7.7 percent year-over-year quarterly revenue growth in 4Q, a company record.
- A loss of 71 cents in diluted earnings per share (EPS), impacted by non-cash pension items, compared with earnings of 93 cents per share in 4Q 2010.
- 52 cents per share in adjusted EPS (non-GAAP), which excludes $1.23
per share in non-operational items, compared with 54 cents in adjusted
EPS in 4Q 2010.
- $18.3 billion in total 4Q revenues, up 13.0 percent year over year; data revenues of $6.3 billion, up 19.2 percent, representing 41.6 percent of service revenues; $15.1 billion in service revenues, up 6.4 percent.
- 1.5 million retail net additions (excluding acquisitions and adjustments), largest increase in three years, includes 1.2 million retail postpaid net customer additions; 108.7 million total connections, includes 92.2 million retail customers.
- 2.6 percent growth in retail service ARPU over 4Q 2010; retail postpaid data ARPU up 14.3 percent.
- 23.7 percent operating income margin; 42.2 percent Segment EBITDA margin on service revenues (non-GAAP).
- 201,000 FiOS Internet and 194,000 FiOS Video net additions, with increased sales penetration for both products; net increase of 98,000 broadband connections from 3Q 2011.
- 8.5 percent year-over-year increase in consumer ARPU; FiOS ARPU was more than $148 per month.
- 14.7 percent increase in strategic services revenues, representing 51 percent of global enterprise revenues.
- 3.0 percent operating income margin; 23.8 percent Segment EBITDA margin (non-GAAP), compared with 23.5 percent in 4Q 2010 and 21.4 percent in 3Q 2011.
Verizon Communications Inc. (NYSE, Nasdaq: VZ) posted the highest year-over-year quarterly revenue growth in the company’s 11-year history in fourth-quarter 2011, fueled by continued strong demand for Verizon Wireless services and handsets, FiOS fiber-optic services, and strategic business products and services.
‘Great Momentum for 2012’
“Verizon finished 2011 very strong, both in terms of revenue growth and by delivering an 18.2 percent total return to our shareholders for the full year, and the company has great momentum for 2012,” said Lowell McAdam, Verizon chairman, president and chief executive officer. “Verizon Wireless produced particularly strong growth in the fourth quarter. While that diluted wireless margins in the short term, it is good news for revenue and margin growth over the long term, particularly given our leadership in the rapidly developing 4G LTE ecosystem.”
McAdam added: “Wireline margins recovered from third-quarter pressures, and we expect wireline margin expansion in 2012. With recent strategic moves and our investments in FiOS, LTE, and global IP and cloud-based strategic services, Verizon has set the stage for accelerated growth across our business units, and we look to continue to build significant value for shareholders in 2012.”
Verizon’s total shareholder return is a combination of stock-price
appreciation and dividend payments. Regarding recent strategic moves,
Verizon last month strengthened its ability to provide fully integrated
solutions by creating Verizon Enterprise Solutions, a sales and
marketing organization, to harness all of Verizon’s solutions for
business and government customers globally. In addition, Verizon
Wireless announced agreements to purchase AWS (Advanced Wireless
Spectrum) licenses, an important step toward meeting customers’ needs
for wireless data and broadband services.
4Q and Full-Year Earnings Results
Due primarily to the impact of previously announced non-cash pension items, Verizon reported a loss of 71 cents in EPS in fourth-quarter 2011, compared with earnings of 93 cents per share in fourth-quarter 2010.
Adjusted fourth-quarter 2011 earnings (non-GAAP) of 52 cents per
share exclude $1.20 per share, or $3.4 billion after-tax, due to the
actuarial valuation of Verizon’s benefit plans, and 3 cents per share
for the early extinguishment of debt. This annual valuation adjustment,
resulting from changes in actuarial assumptions, is in accordance with a
Verizon accounting policy adopted last year. Comparable adjusted
fourth-quarter 2010 earnings were 54 cents per share, excluding the
impact of non-operational items, the largest of which was a gain from
benefit-plan valuation of 44 cents per share.
On an annual basis, Verizon reported 85 cents in 2011 EPS, compared
with 90 cents per share in 2010. Adjusted annual EPS (non-GAAP) was
$2.15 in 2011, compared with $2.08 on a comparable basis (non-GAAP,
excluding results from divested businesses) in 2010.
Consolidated Revenue Growth, Strong Cash Flows
In fourth-quarter 2011, Verizon’s total operating revenues were $28.4 billion on a consolidated basis, an increase of 7.7 percent compared with fourth-quarter 2010. For full-year 2011, revenues totaled $110.9 billion, a 4.0 percent increase compared with 2010, when results included revenues from operations that have since been divested. On a comparable basis (non-GAAP), Verizon’s 2011 full-year revenues increased 6.2 percent compared with 2010.
Consolidated EBITDA (earnings before interest, taxes, depreciation and amortization) totaled $29.4 billion in 2011. On an adjusted basis (non-GAAP), EBITDA increased by more than $950 million in 2011 compared with 2010.
Cash flow from operating activities totaled $29.8 billion in 2011, and capital expenditures totaled $16.2 billion. Free cash flow (non-GAAP, cash flow from operations less capex) was more than $13.5 billion in 2011. From this total, Verizon returned $5.6 billion in quarterly dividends to shareholders in 2011, as the company’s Board of Directors approved a fifth consecutive year of dividend increases.
Verizon Wireless Delivers Strong Customer and Revenue Growth
In fourth-quarter 2011, Verizon Wireless delivered the highest number of retail net additions in three years and strong growth in revenues, driven by increased smartphone penetration and increased retail postpaid ARPU (average monthly service revenue per user).
Wireless Financial Highlights
- Total revenues were $18.3 billion in fourth-quarter 2011, up 13.0 percent year over year. Data revenues were $6.3 billion, up more than $1.0 billion or 19.2 percent year over year, and represented 41.6 percent of all service revenues. Service revenues were $15.1 billion, up 6.4 percent year over year. For full-year 2011, total revenues were $70.2 billion, up 10.6 percent over full-year 2010, and service revenues were $59.2 billion in 2011, up 6.3 percent year over year.
- Retail service ARPU grew 2.6 percent over fourth-quarter 2010, to $53.14. Retail postpaid ARPU grew 2.5 percent, to $54.80. Retail postpaid data ARPU increased to $22.76, up 14.3 percent year over year.
- In fourth-quarter 2011, wireless operating income margin was 23.7
percent, and wireless generated $6.4 billion of EBITDA. Segment EBITDA
margin on service revenues (non-GAAP) was 42.2 percent, down 530 basis
points from fourth-quarter 2010. For full-year 2011, operating income
margin was 26.4 percent, down 310 basis points from full-year 2010;
Segment EBITDA margin was 44.8 percent, down 210 basis points.
Wireless Operational Highlights
- Verizon Wireless added 1.0 million total net connections in fourth-quarter 2011. The company added 1.5 million retail customers, including 1.2 million retail postpaid customers. While the wholesale channel grew during the fourth quarter, a loss of telematics customers resulted in a net decrease of 490,000 wholesale and other connections in the quarter. These totals exclude acquisitions and adjustments.
- At year-end 2011, the company had 108.7 million total connections, a 6.3 percent increase year over year, consisting of 92.2 million retail connections and 16.5 million wholesale and other connections.
- At year-end 2011, smartphones accounted for 44 percent of the Verizon Wireless retail postpaid customer phone base, up from 39 percent at the end of third-quarter 2011.
- Retail postpaid churn was 0.94 percent in fourth-quarter 2011, an improvement of 7 basis points year over year. Total retail churn was 1.23 percent, an improvement of 14 basis points year over year.
- Verizon Wireless continued to roll out its 4G LTE mobile broadband network, the largest 4G LTE network in the U.S. As of Monday (Jan. 23), Verizon Wireless 4G LTE service was available to more than 200 million people in 195 markets across the U.S.
- Verizon Wireless introduced six new 4G LTE devices in fourth-quarter 2011: the Droid Razr by Motorola; the Samsung Stratosphere; the HTC Rezound; the Galaxy Nexus by Samsung; and Droid Xyboard tablets in 10.1-inch and 8-inch form factors. Earlier this month, the company announced that six additional 4G LTE devices would be available in the coming weeks, including two mobile hotspots, now called Jetpacks, from ZTE and Novatel; three smartphones – the Droid 4 and Droid Razr Maxx from Motorola, and the Spectrum from LG, which launched last week; and the Samsung Galaxy Tab 7.7.
- In December, Verizon Wireless announced agreements to purchase AWS licenses from SpectrumCo – a joint venture of Comcast, Time Warner and Bright House Networks – and from Cox TMI Wireless. The spectrum licenses under the two agreements cover 93 percent of the U.S. population, and the purchases are subject to regulatory approval.
- Verizon Wireless’ 4G LTE network was ranked No. 1 on PC World’s 100
Best Products of 2011 list. In October, RootMetrics ranked Verizon
Wireless tops for network performance in Boston and 21 other cities
nationwide; in November, Verizon Wireless won the RootMetrics RootScore
award for data performance in 36 markets.
FiOS, Strategic Services Contribute to Revenue Growth
In fourth-quarter 2011, revenues and customers continued to increase
for FiOS services, and sales of strategic services to business customers
remained strong. Segment EBITDA margins (non-GAAP) also increased both
sequentially and year over year.
Wireline Financial Highlights
- Fourth-quarter 2011 operating revenues were $10.1 billion, a decline of 1.5 percent compared with fourth-quarter 2010. Consumer revenues grew 1.3 percent compared with fourth-quarter 2010.
- In fourth-quarter 2011, wireline operating income was $300 million, up 18.6 percent from fourth-quarter 2010. Segment EBITDA (non-GAAP) was $2.4 billion in fourth-quarter 2011, flat compared with fourth-quarter 2010 and an increase of $243 million from third-quarter 2011, when the Segment EBITDA was impacted by storm-related repair costs and a two-week strike. Operating income margin was 3.0 percent in fourth-quarter 2011. Segment EBITDA margin (non-GAAP) was 23.8 percent, compared with 23.5 percent in fourth-quarter 2010 and 21.4 percent in third-quarter 2011.
- Consumer ARPU for wireline services was $96.43 in fourth-quarter 2011, up 8.5 percent compared with fourth-quarter 2010. ARPU for FiOS customers totaled more than $148 in fourth-quarter 2011, rising approximately $2 year over year. FiOS services to consumer retail customers represented 61 percent of consumer wireline revenues in fourth-quarter 2011.
- Global enterprise revenues totaled $3.9 billion in the quarter, up
1.3 percent compared with fourth-quarter 2010. Sales of strategic
services – including Terremark cloud services, security and IT
solutions, and strategic networking – increased 14.7 percent compared
with fourth-quarter 2010 and represented 51 percent of global enterprise
revenues in fourth-quarter 2011.
Wireline Operational Highlights
- Verizon added 201,000 net new FiOS Internet connections and 194,000 net new FiOS Video connections in fourth-quarter 2011. Verizon had a total of 4.8 million FiOS Internet and 4.2 million FiOS Video connections at year-end.
- FiOS penetration (subscribers as a percentage of potential subscribers) continued to increase. FiOS Internet penetration was 35.5 percent at year-end 2011, compared with 31.9 percent at year-end 2010. In the same periods, FiOS Video penetration was 31.5 percent, compared with 28.0 percent, respectively. The FiOS network passed 16.5 million premises at year-end 2011, up more than 900,000 from year-end 2010.
- Broadband connections totaled 8.7 million at year-end 2011, a 3.3 percent year-over-year increase. FiOS Internet connections more than offset a decrease in DSL-based HSI connections, resulting in a net increase of 98,000 broadband connections from third-quarter 2011. Total voice connections, which measures FiOS Digital Voice connections in addition to traditional switched access lines, declined 7.2 percent to 24.1 million – the smallest year-over-year decline since first-quarter 2006.
- Verizon continued to enhance its global portfolio of secure IT and advanced communications platforms and industry-focused solutions. In fourth-quarter 2011, this included an expansion of the company’s Voice-over-IP service within the Asia-Pacific region and the rollout of an automated healthcare fraud-detection platform for private health insurers and government agencies.
- Multinational corporations, leading businesses and government agencies – including Accenture plc; Chrysler Group LLC; the Commonwealth of Pennsylvania; GXS Inc.; MagnaCare Holdings Inc.; Tyson Foods Inc.; Consolidated Edison Company of New York Inc.; and Orange and Rockland Utilities Inc., a Con Edison subsidiary – completed new agreements or expanded their relationships with Verizon for a range of advanced communications and information technology solutions. Verizon also announced that it had been named a prime contractor under the U.S. General Services Administration’s CONNECTIONS II contract to provide professional and managed services and custom networking solutions at federal facilities.
- Verizon continued to broaden the scope and capabilities of its network infrastructure. In fourth-quarter 2011, the company completed deployment of its next-generation 100 gigabit-per-second network route between New York City and Chicago and kicked off seven additional routes in the U.S.; expanded the Ethernet footprint to an additional 80 nodes supporting 23 areas in the Eastern part of the U.S.; expanded the global Private IP network into six additional countries in Africa and two more countries in the Middle East; and activated the first phase of the Europe India Gateway (EIG) submarine cable connecting Europe to the Middle East and Africa with 40G high-speed connections.
NOTE: Reclassifications of prior period amounts have been made, where appropriate, to reflect comparable operating results for the divestiture of overlapping wireless properties in 105 operating markets in 24 states during the first half of 2010; the wireless deferred revenue adjustment that was disclosed in Verizon’s Form 10-Q for the period ended June 30, 2010; the spinoff to Frontier of local exchange and related landline assets in 14 states, effective on July 1, 2010; and other non-operational items. See the accompanying schedules and www.verizon.com/investor for reconciliations to generally accepted accounting principles (GAAP) for non-GAAP financial measures cited in this document.
Verizon Communications Inc. (NYSE, Nasdaq: VZ), headquartered in New York, is a global leader in delivering broadband and other wireless and wireline communications services to consumer, business, government and wholesale customers. Verizon Wireless operates America’s most reliable wireless network, with nearly 109 million total connections nationwide. Verizon also provides converged communications, information and entertainment services over America’s most advanced fiber-optic network, and delivers integrated business solutions to customers in more than 150 countries, including all of the Fortune 500. A Dow 30 company with $111 billion in 2011 revenues, Verizon employs a diverse workforce of nearly 194,000. For more information, visit www.verizon.com.
VERIZON’S ONLINE NEWS CENTER: Verizon news releases, executive speeches and biographies, media contacts, high-quality video and images, and other information are available at Verizon’s News Center on the World Wide Web at www.verizon.com/news. To receive news releases by email, visit the News Center and register for customized automatic delivery of Verizon news releases.
1. i3izkit311 (Posts: 24; Member since: 17 Oct 2011)
I don't think this is good news for the consumer - both with their net loss and their percent of revenue via data...
3. remixfa (Posts: 13882; Member since: 19 Dec 2008)
their net loss had nothing to do with growth and/or churn. if you read the article it was because of an internal adjustment on employee benefits.
6. sumdude (Posts: 50; Member since: 20 Oct 2011)
I think your right, unfortunately. I think corp. is gonna put the axe on unlimited plans in the very near future. If they do and are without an impending quad core or Galaxy 3 slated for release on Big Red. Sayonara, I'll opt out of my 2 yr, $3,000+ contract. No phone is worth that kind of moolah.
2. secondcor517 (Posts: 94; Member since: 06 Oct 2008)
How can you not think the data revenue is great? It was up 19% yoy. You're an idiot if you don't think thats awesome.
4. sumdude (Posts: 50; Member since: 20 Oct 2011)
He means great for Verizon, not great for consumer pocketbooks.
5. cnwwyo (Posts: 123; Member since: 26 May 2011)
so they have to subsidise i-crap to sell them or am i reading it wrong?
7. jamrockjones (Posts: 345; Member since: 26 Oct 2011)
Verizon has a whole heap of customers!!! Image if every other carrier went out of business but Verizon and At&t, they could charge or do whatever they want. It make complete sense that At&t wasn't able to buy T-Mobile. that's why I'll stick with Sprint, We need power to be more level between the larger carriers, plus unlimited data, and I don't want to pay all that money for only 2GB of data.
8. rcrider4 (Posts: 118; Member since: 14 Nov 2011)
I agree. I am with sprint and it is definitely the best value. I am getting for $70 what you can't even get with other carriers, and if you could, it would cost a fortune
10. downphoenix (Posts: 1991; Member since: 19 Jun 2010)
Sprint is a good deal but I am going to be switching to Tmobile in the near future. I would rather pay upfront for a phone and get cheaper service overall that way like the Europeans do. Maybe if people pay $500 instead of $200 for a phone they would treat it more carefully and with more respect.
11. networkdood (Posts: 4749; Member since: 31 Mar 2010)
I gave Verizon 3 lines - I am happy with my DROID RAZR - SPrint customer with an iphone - enjoy the speed...lol
12. letsb4real25 (Posts: 21; Member since: 28 Dec 2011)
I agree with you...i took my three lines from Sprint to Verizon and the saying is true you get what you pay for especially in terms of service. I have two Rezounds and a iPhone and I don't regret my decision. The way carriers have brainwashed people to think they actually need unlimited data is crazy. I got the 4 GB promotion that they were doing for LTE phones and I barely use 1 GB/mo. Grant it I have broadband at home and I leave my phone's wifi on but I am still a heavy user while I'm away. Unlimited is overrated.
13. btbotimtim (Posts: 123; Member since: 08 Dec 2010)
You didn't change that 4GB to unlimited?
I have 5lines with verizon. I bought it on Thanksgiving penny sale on Amazonwireless. Rezounds and RAZRs at pennies. Right after, I added wifi hotspot and removed it. Got unlimited data. Never need to connect it to wifi.
Other carriers 3G/4G cannot be competed against verizon's LTE.
15. lsutigers (Posts: 558; Member since: 08 Mar 2009)
DOOD get your facts straight. Most of the Sprint data speed issues that VZW and AT&T also experienced when they first started carrying the iPhone have been resolved. Of course, there are still some issues but Sprint is working very quickly on this. Within the last few months, 3G data speeds have increased in my area to an average of 1.2mbps.
Letsb4real25, like you, I did the opposite, switched from VZW to Sprint and couldn't be happier. The service is very comparable and the price is much lower. I used to work for VZW so I know their marketing tactics and how their employees talk to customers (anything but Verizon is garbage). While VZW is good, they do have dead spots like every other carrier, my Sprint phone works just about everywhere my VZW phone did.
16. letsb4real25 (Posts: 21; Member since: 28 Dec 2011)
@btbotimtim I didnt know, if so I would have done that. I did get the Rezounds for a penny but I had no idea they would let you keep the unlimited if you removed the hotspot feature.
@Isutigers Don't get me wrong I had about eight good years with Sprint. Then around summer of last year the local network turned to garbage. I called and called. had an airave sent out to my apt no service at my job after a specific time. I think the network had become overloaded. Don't really know but I was also interested in actually being able to use 4G although I had a 4G phone on Sprint since the original Evo and never really got to use it because my city didn't have it and still doesn't. Talk about a waste of money...now aside from rare outages, Verizon's 4G is pretty much everywhere I go.