Verizon Earnings Dented By Worker Strike
July 26 2016 - 8:19AM
Dow Jones News
By Anne Steele
Verizon Communications Inc. reported revenue fell more than
expected in the most recent quarter amid continued weakness in the
wireless division and a union work stoppage that ate into the
bottom line.
The report comes a day after Verizon said it would buy Yahoo
Inc.'s Web assets for $4.83 billion in cash, ending a drawn-out
process for the beleaguered internet company. For New York-based
Verizon, the deal adds another piece to the digital media and
advertising empire it is trying to build.
For the quarter ended June 30, Verizon said it added 615,000 net
retail postpaid wireless subscribers, a 46% drop from the
prior-year period. Postpaid churn, or the rate at which customers
canceled service, rose to 0.94% from 0.90% a year ago.
Revenue fell 5.3% to $30.53 billion, just below analysts'
estimates for $30.94 billion.
In all, Verizon reported a profit of $702 million, or 17 cents a
share, down from $4.23 billion, or $1.04 a share, a year
earlier.
Earnings were dented 7 cents per share by the seven-week work
stoppage in wireline. Excluding items related to mark-to-market
pension and benefit re-measurements, early debt redemption and
tender offers, adjusted earnings were 94 cents a share, above
analyst expectations for 92 cents a share.
In April, the Communications Workers of America and the
International Brotherhood of Electrical Workers called a strike
after about 10 months of contract talks. In May, the two unions
representing more than 36,000 Verizon workers won concessions from
the carrier in a new four-year contract, helping to end a nearly
seven-week labor strike.
Verizon offered its unions a nearly 11% raise, a small bump in
pension benefits and a promise to add 1,400 new union jobs. Verizon
also agreed to scale back subcontracting and withdrew a proposal to
relocate employees for extended periods -- two issues that had been
at the heart of the standoff.
Meanwhile, growth at its Fios TV and high-speed internet
business continued to struggle.
Verizon lost a net 13,000 internet customers in the quarter, as
the work stoppage affected Fios connection growth. It lost 41,000
video customers. The company said it made "significant progress"
working through a backlog of Fios installations in June and has
since returned to its normal run rate of connection growth.
Verizon has been shifting its wireless customers to noncontact
plans that have a cheaper monthly service rate but require
customers to pay full price for their device, usually in
installments.
The percentage of phone activations on installment plans fell to
67% from 68% in the first quarter and below the 70% the company had
anticipated. Verizon said it expects that rate to remain
consistent.
Verizon, which has been facing rising competition, has warned
that earnings may plateau in 2016 as it works through changes it
has made to keep its wireless plans in line with rivals. On
Tuesday, the company backed its guidance for 2016 earnings --
excluding the impact from the work stoppage -- to remain flat with
2015 at $3.99 a share.
Shares, which have risen 11% over the past three months, slipped
0.2% to $55.78 in premarket trading.
Write to Anne Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
July 26, 2016 08:04 ET (12:04 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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