Strong wireless growth not enough to offset charges for Verizon: $3 billion charge related to layoffs weighs on earnings

Verizon Communications Inc. posted rocky fourth quarter 2009 results that were impacted by one-time charges related to job cuts and an increasing dependency on its wireless operations.
Verizon announced a 10% increase in revenues during the quarter driven solely by its mobile division, which posted a 22.5% surge in revenues. The strong wireless showing was offset by its wireline and “other” services that saw revenues drop by 3.9% and 17.8% respectively year-over-year.
Further burdening Verizon’s bottom line was a $3 billion charge taken in relation to more than 7,400 job cuts during the quarter that culminated in a total of 13,000 job cuts at the company in 2009. Verizon’s management said it expects to make a similar number of job cuts in 2010.
For the quarter, Verizon posted a net loss of 23 cents per share compared with a return of 43 cents per share that it posted during the fourth quarter of 2008. The company added that it would have posted a return of 54 cents per share without the one-time charge.
Wireless rolls thanks to resellers
Verizon reported that its wireless division added more than 2.2 million total customers to its network during the quarter, which was an 80% improvement compared with the 1.25 million it added during the fourth quarter of 2008. Most of that growth was through resale partners as the carrier’s retail customer growth inched up only slightly year-over-year to 1.232 million customers. While not naming names, Verizon Wireless has resale partnerships with a number of companies, including Tracfone Wireless Inc. and powers Tracfone’s recently launched Straight Talk service.
Verizon Wireless, which has a history of touting its reliance on direct postpaid customer growth, added that it has the most direct customers in the industry (87.5 million at the end of the year) and remains the industry’s largest operator with 91.2 million customers.
Customer churn increased slightly during the quarter from 1.35% in 2008 to 1.42% in 2009, while retail churn, including direct prepaid churn, saw a greater increase from 1.34% in 2008 to 1.44% in 2009.
Average revenue per user also took a hit as direct service ARPU dropped 2.2% year-over-year to $50.75. Data services saw a 16.1% increase in ARPU to $16.24 and accounted for 32% of customer ARPU during the quarter. Verizon Wireless recently introduced new rate plans that cut the price of unlimited voice calling from $100 per month to $70 per month, but now requires customers with 3G feature phones to select a data package beginning at $10 per month or with a smartphone to select a data package that runs $30 per month.
“We continue to believe that Verizon’s data ARPU is still feeling the impact of the challenging macro environment, especially on the business side,” said Julien Blin, principal analyst and CEO of JBB Research. “However, Verizon’s recent introduction of cheaper unlimited data plans should boost Verizon’s data ARPU growth in the upcoming quarters.”
For the fourth quarter wireless services accounted for 58% of Verizon’s $27.1 billion in revenues and 57.6% of the company’s $107.8 billion in revenue for the year.
Verizon’s stock was trading down just over 2% early Tuesday.