VZW Adds 1.5M Retail Customers in Q4 2011 Yet Post's a Net Loss of $2.02B

[cereal killer]

Big Red has reported it's Q4 2011 earnings and the numbers are looking very interesting. Verizon added 1.5 million retail customers, which is its largest increase in three years. Of that 1.5 million, 1.2 million were postpaid subscribers. Revenue for the year totaled $110.9 million, up 4% from 2010. You'd think by looking at these numbers that all is well in Verizon land, but a deeper look reveals a very interesting statistic.

A year earlier in Q4 VZW was seeing profit to the tune of $2.64B and this year they are seeing a net loss of $2.02B. Bloomberg attributes this to a pension charge and higher subsidy costs for rising iPhone sales. There is hope that the high subsidy cost will eventually pay off as customers spend on calling and data.

The overall picture for Verizon Wireless is a good one though. The carrier announced a total revenue of $18.3 billion for the quarter, representing a 13 percent year-over-year increase. Data played an obvious role in that picture. In fact, 42% of all revenue for the quarter was made up of the $6.3 billion in data revenue. Those numbers are up 19.2% from the same time last year.

Source: BGR

[gadgetrants]

Hmmm, I would have guessed that infrastructure costs in LTE would have been the big ticket item, but maybe all that has gone up already, and they are now in the programming/maintenance phase. Someone want to check the balance sheet and report back?

The other nugget is that "higher subsidy costs for rising iPhone sales" line item. THAT got my eyebrows to stretch a bit. Interesting. Another reason to "not like" (euphemism) Apple so much? I think us men know when the vice-grip on our cojones has been tightened a notch or two.

-Matt

[metalspring]

Hmmm, I would have guessed that infrastructure costs in LTE would have been the big ticket item, but maybe all that has gone up already, and they are now in the programming/maintenance phase. Someone want to check the balance sheet and report back?

The other nugget is that "higher subsidy costs for rising iPhone sales" line item. THAT got my eyebrows to stretch a bit. Interesting. Another reason to "not like" (euphemism) Apple so much? I think us men know when the vice-grip on our cojones has been tightened a notch or two.

-Matt

Im pretty sure they are still working on getting 4g everywhere, maybe they just slowed down a little? i just found out yesterday that they will be expanding 4g to where i live in april, which coincidentally is exactly when i get my upgade, lucky or what? lol

[gadgetrants]

Im pretty sure they are still working on getting 4g everywhere, maybe they just slowed down a little? i just found out yesterday that they will be expanding 4g to where i live in april, which coincidentally is exactly when i get my upgade, lucky or what? lol

What are you thinking of getting? (HINT: say any phone at all, just NOT THE DROID 4 or I'm driving tonight to your house and kicking you really hard in the shin! Yeah, I'm still pretty sore about the D4.)

EDIT: woops, that was Freudian..typed DROID 3 by accident.

-Matt

[metalspring]

What are you thinking of getting? (HINT: say any phone at all, just NOT THE DROID 4 or I'm driving tonight to your house and kicking you really hard in the shin! Yeah, I'm still pretty sore about the D4.)

EDIT: woops, that was Freudian..typed DROID 3 by accident.

-Matt

im about 95% sure it'll be the nexus, i need my rooting/romming/kernels/tweaking fix, although i might consider the Samsung galaxy III if it comes to Verizon and the specs are right, that thing looks to be a beast lol

[kodiak799]

The other nugget is that "higher subsidy costs for rising iPhone sales" line item. THAT got my eyebrows to stretch a bit. Interesting. Another reason to "not like" (euphemism) Apple so much? I think us men know when the vice-grip on our cojones has been tightened a notch or two.

-Matt

Sloppy reporting from an analyst looking for a soundbite. The subsidy is probably a little higher than Android phones, but not a ton. Either way, they make the cost of the subsidy back in 12 months on data alone. Not sure how they do the accounting - if they expense the subsidy then they had a big hit in Q4 with ALL the new phones (not just the IPhone), but I suspect they amortize the subsidy over the life of the 2-yr contract.

While they've been investing in LTE for several years, they just turned it on this year and, presumably, began to amortize the expense. If they are using accelerated depreciation (likely), it's going to distort things like shown (although the pension charge might have been really big). Anyway, no equity analyst worth a darn puts much weight on the bottom line income number. I suspect VZW is very healthy and doing just fine.

[droid_mike]

They should have passed on the iPhone like I recommended. Why am I not a big telcom CEO?

[gadgetrants]

They should have passed on the iPhone like I recommended. Why am I not a big telcom CEO?

Yeah, and last I heard it was a big "meh"...nothing like the billions of AT&T users defecting to Verizon, like everyone predicted.

So this means they've actually been selling MORE? ARGH. Probably explains why the average IQ of my town has gone down 12 points in the last year, increased car accidents, untended yards, etc.

-Matt

[gadgetrants]

The subsidy is probably a little higher than Android phones, but not a ton.

I'd love to agree with you but I always thought:

- the original reason that VZW turned down Apple was the subsidy terms
- when the deal happened, the terms were pretty much the same (as the original ones)
- and it was VZW that "buckled", realizing how many iPhone users they could snag

I don't have ANY facts to back that up...probably all based on reporter sound bites!

-Matt

[kodiak799]

It was more about control (i.e. bloat, among other things) that VZW fought Apple over. So they lost a few bucks there, but the IPhone subsidy is probably not more than $50 above than the Android phones. The analyst makes it sound like IPhones "cost" VZW hundreds of dollars more, which is simply not true, not to mention they recover the cost in less than 6 months on a new subscriber. The IPhone needed VZW every bit as much as VZW needed them, probably more. Most of the people who wanted the IPhone had already gone to AT&T, meaning the IPhone was going to lose out on the bulk of VZW customers upgrading to smartphones. If and when VZW gets an LTE IPhone, then I think you'll see a lot more switchers.

More than likely the bigger impact is a lot of VZW Android users had their first upgrade this year in Q4, so VZW has millions more in subsidies without any incremental revenue from new subscribers. Also, you may have finally got a big exodus of IPhone users from AT&T with the newest IPhone in October (AT&T locked-up a bunch in the months preceding the VZW IPhone launch).