While Verizon managed to hit on most of the fundamentals in the fourth quarter, the company suffered a huge loss on pension and severance costs.
Due to the impact of non-operational items, Verizon reported a consolidated loss of 54 cents per share in the fourth-quarter 2014, compared with a gain of $1.76 in EPS in fourth-quarter 2013.
Loss aside, Verizon Wireless added 2 million high-value net retail postpaid connections in the fourth quarter, as total wireless revenues hit $87.6 billion, up 8.2 percent from the $81 billion the carrier reported in the same quarter last year.
Tablets again saved the day. Of Verizon’s 2 million postpaid additions, 1.4 million were tablets. Average Revenue Per Account (ARPA) was up from $157.42 in the fourth-quarter of 2013 to $162.98 in the most recent quarter.
New phones from Samsung and Apple pressured EBITDA service margins. In fourth-quarter 2014, wireless operating income margin was 23.5 percent and segment EBITDA margin on service revenues was 42.0 percent. That compares with 29.5 percent and 47.0 percent, respectively, in fourth-quarter 2013.
Verizon said that about 25 percent of phone activations in the quarter were on the company’s EDGE device financing plan. The company finished the year with about 7 million phones on EDGE, which accounts for about 7 percent of all postpaid phones.
When asked about competition in 2015, which pushed churn to 1.4 percent, Verizon CFO Fran Shammo said Verizon still managed to perform, suggesting the hype was overblown.
“The basic point here is that we will continue to compete, and we will continue to compete at a positive value,” Shammo said, adding that “tablets are only 8 percent of our growth, and I’ve said in the past, tablets will be a big part of our growth going forward.”
Shammo said that Verizon continues to draw a line in the sand, as competitors like T-Mobile fight the price war.
“There were certain places that we just did not want to go in order to retain a customer,” Shammo said.
When asked about Title II reclassification, Shammo was indignant. “This will absolutely affect us and the industry on long-term investment in our networks,” Shammo said. “The approach is an extreme and risky path… and will also tie up the industry in a very uncertain time and cause all types of litigation.” Shammo went on to urge Congress to adopt a legislative solution to net neutrality.
Looking ahead, Verizon said it sees consolidated revenue growth of at least 4 percent in 2015. The carrier also said it has committed to a minimum pension-funding requirement of approximately $700 million in the new year.
Shares of Verizon were down slightly Thursday to $47.88 in early trading.
