Verizon Wireless expects to report a 6% decline in its fourth quarter gross profit margins due to strong sales of the Apple Inc iPhone and other devices, according to a top executive for its parent company. Verizon Wireless' costs rose in the fourth quarter because the venture with Vodafone Group Plc sold 4.2 million iPhones and 2.2 million other smartphones using Verizon's highest-speed wireless network.
High smartphone sales always pressure margins because operators pay higher subsidies to offer advanced phones at discounted prices. In exchange, consumers must sign a two-year contract. Subsidies for the iPhone have historically been higher than for other smartphones.
Shares in Verizon Communications (New York) fell 1.3% after Chief Financial Officer Fran Shammo said during a webcast on Wednesday that wireless profit margins fell to a range of 42% to 43% in the quarter from 47.8% in the third quarter.
For 2012, Shammo said the company plans cuts in wireless expenses similar to last year's. In 2011 costs were reduced by $1.8 billion. But he noted that the company's pension contribution obligations would rise to $1.2 billion in 2012 from about $400 million in 2011. The additional pension funding will come from the company's traditional telephone business, Shammo said.
Shammo said the company was pleased with the strong smartphone sales as these customers spend more money with Verizon in the long run.
"This gives us a great momentum going into 2012," the executive said.
He also noted that the strong fourth quarter sales brings Verizon Wireless "extremely close" to its target for 11 million iPhone sales in 2011. Shammo also said the company ended the year with a backlog of 120,000 iPhone orders.
In terms of wireline services, Shammo said the company was looking into the option of offering Internet-based video services outside of its service region.
Asked about the impact of Netflix, a key rival in this space, on Verizon's current wireline business, Shammo dismissed market speculation that Verizon might buy that company.
"There's been a lot of rumors in the marketplace about what I'm buying and not buying," Shammo said. "I'm not buying anything."
Instead Shammo said that Verizon could look at partnerships with a potential revenue sharing element in this market.
(Reporting By Sinead Carew; Editing by Richard Chang)
Connected vehicle technology is rapidly evolving to encompass Vehicle-to-Vehicle (V2V), Vehicle-to-Infrastructure (V2I), Vehicle-to-Device (V2D), and Vehicle-to-Pedestrian (V2P) signaling and communications. This research examines the V2V and V2X market including technologies, solutions, and major players.
The report evaluates market opportunities and challenges for IoT Device Management solutions across various industry verticals. The report includes forecasting for global and regional markets as well as potential across deployment types and sectors including automotive, manufacturing, smart cities, and more.
Analysis of the DAS market, including carrier WiFi, small cells, and SON, and the leading companies in the DAS ecosystem and their solutions. The report also includes evaluation of market drivers, challenges, and provides forecasts for 2016 to 2021.
Comprehensive coverage of NGN OSS/BSS including opportunities within Big Data and IoT, analysis of the drivers and issues related to the technical and business aspects of OSS/BSS, deployments and operations issues, and quantitative analysis with forecasts for anticipated growth through 2021.