Verizon CFO Fran Shammo said Wednesday that the company sold a record 4.2 million iPhones in the fourth quarter, but its success came at a cost.
The strong sales of the device – more than double the 2 million Verizon Wireless sold during the third quarter – are expected to take a chunk out of the operator’s fourth-quarter profits, which will be announced in full on Jan. 24.
“Given the volume, we’re going to see a 500 to 600 basis point decrease in wireless margins in the fourth quarter,” Shammo said during an interview at the Citibank Global Entertainment, Media & Telecommunications Conference in San Francisco yesterday.
Verizon Wireless’ operating income margin was 29 percent during the third quarter.
Shammo said that Verizon also sold about 2.2 million LTE devices during the fourth quarter. Costly subsidies on those gadgets also contributed to the impact on profits.
Verizon Wireless, AT&T and Sprint Nextel got Apple’s new iPhone 4S in October. Pent-up demand for the popular smartphone resulted in a fourth-quarter sales surge during the already busy holiday shopping season.
Shammo said Verizon still had a backlog of 120,000 iPhones on Dec. 31. Strong sales of the device during the last three months of 2011 brought Verizon “extremely close” to its target of selling 11 million iPhones during 2011, he said.
Verizon first began selling the iPhone last February, putting an end to AT&T’s four-year exclusive hold on the device.