Verizon Earnings Dented By Worker Strike

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 [e-mail]

(END) Dow Jones Newswires

July 26, 2016 08:04 ET (12:04 GMT)

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