Verizon Posts $2 Billion Loss In iPhone Death By A Thousand Cuts

Verizon Posts $2 Billion Loss In iPhone Death By A Thousand Cuts
Verizon Wireless swung to a $2 billion loss, despite higher data revenue and doubled iPhone sales. Increased interest in the Apple smartphone was a double-edged sword. Higher iPhone demand resulted in steeper subsidies paid by the second-largest domestic carrier during the fourth quarter.

In a corporate version of A Tale of Two Cities, Verizon announced higher iPhone sales, higher wireless revenue, but lower profit. Spurred by iPhone sales during the quarter that doubled to more than 4 million handsets over the previous three-month period, wireless revenue rose 13 percent to $18.3 billion. Sales of data plans required by smartphones jumped 19 percent.

However, wireless profits fell 5.3 percent from 42.2 percent of sales. The reason: carriers adopting the iPhone and other smartphones are playing a high-stakes game of Chicken. The popular devices attract more subscribers and lucrative data plans. The question is whether those advantages outweigh the cost of paying subsidies to handset makers, such as Apple.

“The average smartphone customer will spend about $2,000 over a two-year contract, if the subsidy is $400, you’re still getting $1,600, and that’s very cash-flow positive,” Barclays Capital analyst James Ratcliffe tells Bloomberg.

Verizon said it added 1.2 million subscribers in the fourth quarter as a result of its smartphones. Although Verizon financial chief Fran Shammo early this month said the carrier sold more than 4 million iPhones during the fourth quarter, overall smartphone sales reached 7.7 million handsets, 1.5 million than Shammo forecasted. The reason: slowing demand for Android-based smartphones — despite all of the holiday hoopla.

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  • dibarnu

    Copying & pasting must be really difficult. Let me help

    “Total smartphone sales were 7.7 million units, 1.5 million fewer than Piecyk predicted.”

    You’re welcome!

  • pangeomedia

    Geez, CoM, what a crock. The implication here is that Verizon’s higher costs to subsidize iPhone sales drove the company to massive losses. The reality is quite a bit different. As the company stated, accounting changes regarding pensions resulted in the loss. Take out the pension issue and Verizon made a boatload of money. Again. Say, ‘thank you, iPhone.’

  • Demonstr8r

    This title is nothing more than click bait! The most telling data in this article is “between the lines” of the last two paragraphs. Doing the rough math, Verizon sold 4 million iPhones during the last quarter, which results in approximately $8B revenue over the next two years. Notice that I didn’t say new revenue, as I realize some portion of this is simply existing customers upgrading the phone with similar voice and data plans. Either way, a significant portion of that is new revenue as a direct result of iPhone sales in a single quarter. Not to mention, the iPhone accounted for more than half of all smartphones sold by Verizon last quarter. That certainly doesn’t sound like a “Death by a Thousand Cuts”.

  • FriarNurgle

    “Verizon financial chief Fran Shammo”. Love the name. Say it with me, Shammo. 

  • Alfiejr

    this CoM article is seriously botched. bad, bad CoM. if you have any editorial self-respect, you’ll update it to fix its major errors. we’ll see.

  • aardman

    Yup, this article is seriously, almost maliciously, misinformed.

  • redoak

    What about the headline here that iPhone captures a majority of smart phone sales at Verizon in Q4?   Isn’t that the real data point  

    It’s the pension cost that resulted in the loss.  Due some basic reporting 

    I think this was writen by the cultofandroid.com side of the house… And they just pulled it into this site  

    It’s stories like this why I rarely come here anymore  

  • Keita123

    Me and my wife made more money at the casino… On our way back, we stopped and had dinner. The cost of dinner+ tip and parking put us in the negative !! What a load of zhit

About the author

Ed SutherlandEd Sutherland is a veteran technology journalist who first heard of Apple when they grew on trees, Yahoo was run out of a Stanford dorm and Google was an unknown upstart. Since then, Sutherland has covered the whole technology landscape, concentrating on tracking the trends and figuring out the finances of large (and small) technology companies.

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