Verizon Earnings Pummeled by Pension Charges (VZ, T, S, AAPL)

Shares of Verizon Communications Inc. (NYSE: VZ) are down more than -2% in pre-market trading this morning following the company’s fourth quarter and full year earnings report. Verizon posted adjusted EPS of $0.52 on revenue of $28.4 billion for the quarter. The consensus estimate called for EPS of $0.53 on revenue of $28.4 billion.

AT&T Inc. (NYSE: T), Verizon’s chief competitor, is scheduled to report earnings on Thursday. Analysts are expecting EPS of $0.44 on revenue of $31.96 billion. Sprint Nextel Corp. (NYSE: S) reports quarterly earnings on February 8th, and is expected to post an EPS loss of -$0.37 on revenue of $8.69 billion.

Verizon took a non-cash charge of $1.20/share “ due to the actuarial valuation of Verizon’s benefit plans.” Including that charge and a $0.03/share charge for debt extinguishment, Verizon posted a quarterly EPS loss of -$0.71.

For the full year, Verizon posted GAAP EPS of $0.85, and non-GAAP EPS of $2.15. Analysts were expecting non-GAAP EPS of $2.16. Full-year revenue came in at $110.9 billion, slightly higher than the consensus estimate of $110.84 billion.

Operationally, Verizon Wireless revenue for the quarter totaled $18.3 billion and the company added 1.2 million postpaid customers and 300,000 pre-paid customers during the quarter. Total subscriber connections rose 6.3% year-over-year to 108.7 million. Of that total, 92.2 million are retail customers and the rest are wholesale and other connections. Average revenue per user (ARPU) for retail customers rose just 2.3% in 2011, to $54.34.

Smartphones, including the Apple Inc. (NASDAQ: AAPL) iPhone, accounted for 44% of the company’s postpaid business, up sequentially from 39%. Verizon Wireless began selling the iPhone in October, and sold 4.2 million iPhones in the quarter.

Verizon’s wireline business grew, thanks to new subscribers to its fibre-optic network, FiOS. Plain switched-access phone customers declined by -15.3% in 2011, while digital connections grew by nearly 30%. For the full year, ARPU rose 9.2% in wireline operations to $93.07.

Verizon claims that its 4G LTE network now reaches more than 200 million people in 195 US markets. The company is also seeking regulatory approval for an addition to its spectrum licenses that would give Verizon Wireless coverage of 93% of the total US population.

Paul Ausick