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Verizon posts Q4 loss on pension charges, margin pressure

Verizon posts Q4 loss on pension charges, margin pressure

Verizon Communications reported fourth-quarter revenues of USD 33.2 billion, up 6.8 percent year-over-year. The US operator posted a net loss of USD 0.54 per share, versus a profit of USD 1.76 a year earlier, due to a number of one-time charges for retirement benefits and financing costs. Excluding these items, EPS rose 7.6 percent year-on-year to USD 0.71. Over the full year, revenues increased 5.4 percent to USD 127.1 billion, helped by new revenues streams from the Internet of Things and telematics, which grew 45 percent to USD 585 million. Free cash flow totalled USD 13.4 billion, after capital expenditures increased 3.5 percent to USD 17.2 billion. 

Verizon Wireless revenues in the quarter grew 11.0 percent to USD 23.4 billion. Service revenues increased 2.6 percent to USD 17.4 billion, and retail postpaid ARPA (average revenue per account) in the quarter rose 1.0 percent to USD 158.82 per month. The EBTIDA margin on service revenues fell to 42.0 percent from 47.0 percent a year ago, in line with the operator’s earlier warning for extra costs due to the high number of phone upgrades in the quarter and intense competition. 

In the fourth quarter, Verizon Wireless added 2.1 million retail net connections, including 2.0 million retail postpaid connections, for a total 108.2 million retail connections at year-end. This includes 102.1 million postpaid connections, up by 5.5 percent from end-2013. Verizon Wireless had 35.6 million retail postpaid accounts at quarter-end, up 1.5 percent and equal to 2.87 connections per account. The company added a net of 672,000 postpaid phones, as 4G smartphone additions of 1.5 million were offset by net declines in basic and 3G smartphones. In terms of internet devices, the company added 1.4 million new LTE tablets. At the end of 2014, smartphones accounted for 78.6 percent of Verizon Wireless retail postpaid customer phone base, up from 70.0 percent. Retail postpaid churn was 1.14 percent, an increase of 14 basis points sequentially and 18 basis points year over year. Retail churn was 1.39 percent in the quarter, up 10 basis points sequentially and 12 basis points year over year. 

Verizon Wireline total revenues declined 1.6 percent to USD 9.6 billion in the quarter. Consumer revenues were USD 4.0 billion, up 4.1 percent, with FiOS revenues representing 77 percent of the total. Total FiOS revenues grew 11.6 percent, to USD 3.3 billion.The Wireline operating margin was 4.4 percent, up from 1.2 percent a year earlier, and the EBITDA margin improved as forecast to 23.9 percent from 22.5 percent. Sales of strategic services to enterprise customers grew 1.5 percent to USD 2.1 billion. 

In the fourth quarter, Verizon Wireline added 145,000 net new FiOS Internet connections and 116,000 net new FiOS Video connections. FiOS totaled 6.6 million internet and 5.6 million video connections at year-end, representing increases of 9.0 percent and 7.4 percent, respectively. FiOS Internet penetration was 41.1 percent at the end of 2014, up from 39.5 percent. In the same periods, FiOS Video penetration was 35.8 percent, up slightly from 35.0 percent. The FiOS network passed more than 19.8 million premises by year-end 2014. At the end of 2014, 59 percent of consumer FiOS Internet customers subscribed to FiOS Quantum, which provides speeds ranging from 50 to 500 Mbps, up from 57 percent the prior year. Including DSL, Verizon had 9.2 million broadband connections at year-end, up 2.1 percent. Net broadband connections increased by 59,000 in the fourth quarter and 190,000 for the full year. 

For 2015, Verizon targets revenue growth of at least 4 percent and an adjusted EBITDA margin in line with the full-year 2014 performance. Capital spending is projected to increase slightly to USD 17.5-18.0 billion. The company expects an increase in cash income taxes, with an estimated effective tax rate of 34-36 percent.

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