Verizon posts weak fourth-quarter, promises a better 2013

Tue Jan 22, 2013 3:22pm EST
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By Sinead Carew

(Reuters) - Verizon Communications Inc posted a weaker-than-expected wireless operating profit margin due to hefty costs from smartphones like Apple's iPhone, but the U.S. telephone company promised a big improvement this year as it cuts costs.

While Verizon's fourth-quarter bottom line was weaker than anticipated, investors were encouraged when Chief Financial Officer Fran Shammo said on Tuesday that the company could be in a position to buy back shares sooner than expected and that wireless margins could rise this year to as high as 50 percent.

Shammo said the numbers will be helped by $2 billion in cost cuts at Verizon Wireless, Verizon's mobile venture with Vodafone Group Plc, on top of $5 billion in cuts there in the last three years.

The cuts at Verizon Wireless - the biggest U.S. mobile service provider - will not require extensive layoffs and will come in areas such as call center consolidation and increased efficiency in logistics, Shammo told Reuters.

Shammo also hinted that Verizon may not have to wait until the end of 2013 to buy back shares as he had previously indicated, thanks to the strength of its balance sheet.

"We could do share buybacks at any point in time right now," he told analysts, without giving a specific time frame.

Verizon shares were up 0.6 percent at $42.80 on Tuesday afternoon.

But while some analysts were impressed with the 2013 margin target, others questioned whether it is realistic, considering the prospect of stiffer competition from rivals. Pivotal Research Group analyst Steve Sweeney said the target is "aggressive."   Continued...

A Verizon logo is seen during the International CTIA WIRELESS Conference & Exposition in New Orleans, Louisiana May 9, 2012. REUTERS/Sean Gardner