Verizon Communications said it is facing a slower-than-expected economic recovery and plans to cut 6 percent of its workforce, adding that it forecasts only a modest rebound in late 2010.
After reporting fourth-quarter results that were in line with Wall Street's expectations, Verizon said weak corporate spending hurt its traditional fixed-line business, offsetting subscriber growth at Verizon Wireless. Shares fell 2 percent.
The phone company forecast 13,000 job cuts at its fixed-line business this year, or 6 percent of Verizon's total workforce. It cut 17,000 jobs in 2009, ending the year with 223,000 workers. Severance charges had pushed Verizon into the red in the fourth quarter.
"We're facing more significant headwinds than we'd thought we'd face," Chief Executive Ivan Seidenberg told analysts on a conference call, where he promised to focus on improving profits in the fixed-line business.
Verizon, which spent billions of dollars building the FiOS home video and Internet service to compete with cable rivals, added 153,000 FiOS customers, missing analyst expectations for more than 200,000 subscriber additions.
The lower-than-expected FiOS growth was partly due to the economy, Chief Financial Officer John Killian said. He said he was confident the economy would not get worse, but noted that good third-quarter trends from business clients did not follow into the fourth quarter of last year.
"We are looking for and planning for an economic recovery but more back-end loaded (for 2010). We see a modest recovery, not a boom time situation," Killian told Reuters.
The mobile business, however, was a bright spot. Verizon Wireless, which Verizon owns with Vodafone Group, added 2.2 million customers in the quarter, well above the average forecast of 1.5 million from four analysts Reuters polled.
But the surprise was driven largely by wholesale partners, such as America Movil's Tracfone, which attracts customers that are lower value for Verizon.
Verizon's addition of 1.2 million retail customers was slightly ahead of analyst expectations, and was likely driven by heavy marketing of Motorola's Droid phone, which runs on Google's Android operating system.
"It was a solid quarter but not great," said Piper Jaffray analyst Christopher Larsen. "Retail wireless subscribers were in line with expectations. Wholesale was meaningfully ahead but they tend to be lower value customers."
Larsen said Verizon probably gained back some market share previously lost to AT&T Inc, the exclusive U.S. provider for the Apple Inc iPhone.
Wholesale strength
Verizon posted a net loss of $653 million, or 23 cents per share, compared with net income of $1.24 billion, or 43 cents a share in the same quarter a year ago.
Before items such as $3 billion in charges for workforce reductions, Verizon would have earned 54 cents per share, matching the average analyst forecast. Verizon said its headcount fell by 7,400 in the fourth quarter, or 17,000 in the full year 2009.
Revenue rose to $27.1 billion from $24.65 billion in the year-earlier quarter, before it bought mobile service Alltel.
This compared with the average analyst estimate for $27.33 billion, according to Thomson Reuters I/B/E/S.
Revenue at Verizon's fixed-line business overall fell 3.9 percent in the quarter to $11.5 billion.
The company forecast capital spending for 2010 in a range of $16.8 billion to $17.2 billion, similar to 2009 spending of $17 billion. Killian said spending should be evenly spread out over the year with a modest increase to the wireless portion.
Verizon forecast incremental pressure on earnings per share of 4 cents to 6 cents due to non-cash pension and retiree benefit costs for 2010.
It also said that in future earnings reports it would no longer adjust reported results for special items but promised to still provide data to explain reported results.
Verizon shares fell 68 cents, or 2.2 percent, to $30 in morning trade on the New York Stock Exchange. AT&T shares were down 1 percent at $25.33.
