Earnings Preview: Verizon expected to report 58 cents per share in 1Q earnings

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Earnings Preview: Verizon to report 1Q results

NEW YORK — Verizon Communications Inc., the nation’s largest wireless carrier and second-largest telecommunications company, reports its first-quarter results before the stock market opens on Thursday.

WHAT TO WATCH FOR: Verizon Wireless is neck-and-neck with AT&T Inc. in the competition for high-paying wireless subscribers. AT&T has the iPhone, while Verizon has a wider, more reliable network.

Analysts expect Verizon to report adding a net of about 700,000 “postpaid,” or contract-signing customers in the quarter, slightly more than AT&T.

There’s also talk of AT&T losing its exclusive contract with Apple Inc. this year, but the companies haven’t confirmed anything. Verizon CEO Ivan Seidenberg said early this month that the company has told Apple that it wants to carry the iPhone, but he declined to say when or if it would be able to do so.

On the wired side, Verizon said during the quarter that it would halt expansion of its fiber-optic TV and Internet service, FiOS. It’s now focusing on bringing FiOS to households in areas where it already has video franchise agreements. Much work remains to draw optical fiber in Philadelphia, New York and Washington, but Boston and Baltimore will be left out.

Verizon has been spending billions on FiOS, and a slowing buildout should save money it can use to maintain its dividend. But it also means it’s limiting its own ability to compete with cable companies for wired service.

Compared to AT&T, Verizon is hamstrung by the fact that a partner, Vodafone Group PLC, owns 45 percent of its growth engine, Verizon Wireless. That means only 55 percent of its profits flow to Verizon. Verizon has signaled before that it wants to get out of the situation somehow, but it seems unlikely to be able to buy out Vodafone.

WHY IT MATTERS: Verizon has much wider “3G” fast data coverage than AT&T, and a Verizon version of the iPhone would make the device practical in out-of-the-way areas where AT&T has no 3G coverage.

Verizon’s FiOS service has provided tough competition for the cable companies in its area, and probably prompted them to raise their Internet speeds. With FiOS expansion now limited, they’ll have less reason to improve their offerings.

WHAT’S EXPECTED: Analysts surveyed by Thomson Reuters expect Verizon to earn 56 cents per share on $26.9 billion in revenue. The estimate does not include a $970 million non-cash, one-time charge the company has announced it will take in the quarter because of a tax effect of the U.S. health care reform. That charge should trim earnings by about two thirds.

LAST YEAR’S QUARTER: Verizon reported a profit of 58 cents per share on $26.6 billion in revenue.