Verizon cuts revenue outlook as price war continues

Tue Jul 21, 2015 2:55pm EDT
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By Malathi Nayak and Devika Krishna Kumar

(Reuters) - Verizon Communications Inc on Tuesday lowered its full-year revenue target as it fends promotions from its competitors.

Investors shrugged off higher-than-expected second-quarter earnings, which resulted mostly from a jump in tablet subscribers, and sent shares of the largest U.S. wireless service provider down as much as 3 percent.

Smaller rivals such as T-Mobile US Inc have stirred up an industry price war, and wireless carriers have been offering heavy promotions and discounts on tablet and phone plans to keep or increase subscribers.

The companies have replaced traditional two-year contracts of subsidized phones and tablets with monthly installment plans that have lower service fees.

Customers shifted to the installment plans at a higher rate than Verizon had anticipated earlier in the year, resulting in a decline in service revenue, Chief Financial Officer Fran Shammo said in an interview.

Verizon said it expected full-year revenue growth of at least 3 percent, below its previous forecast of 4 percent.

Average revenue per user fell 3.8 percent to $153.73 in the quarter from a year earlier and missed the analysts' average forecast of $154.99, MoffettNathanson analyst Craig Moffett said in a note.

Despite pressure on revenue per user, "Verizon's wireless margins remain the envy of the industry," Moffett said.   Continued...

A woman is cashed out at a Verizon store in New York's financial district May 12, 2015.  REUTERS/Brendan McDermid