Strong iPhone Sales May Crimp Verizon’s Q4 Profits
Telcos witnessed plunging earnings in the last quarter of 2011, which analysts said were mostly caused by device subsidies offered by service providers in order to draw more attention from subscribers.
Both AT&T and Verizon are slated to release their financial reports this week that according to experts will reflect one common indicator – shrinking profit margins due to subsidies.
On top of declining revenues being sourced from the telecom industry’s voice services, analysts noted too that the average monthly revenue per user or ARPU of major telcos failed to keep up with the growing number of smartphone and tablet activations.
The only way for telcos to increase their incomes is to hike their wireless data plan prices.
As millions of Apple and Android devices were being sold by manufacturers, analysts said that telcos only posted single-digit improvements on their wireless services’ year-over-year revenues.
Acording to UBS the most was only an average of five percent revenue growth for major U.S telecom companies despite their reports that target sales for devices, especially in the case of Apple gadgets, have been reached.
On its part, Verizon Communications said on January that it sold and activated 10.7 million iPhones for 2011, 4.2 million of which in the last quarter alone, but analysts are betting that the company will report earnings that are lower than previously projected.
The same is expected from AT&T, which earlier declared that its iPhone sales in the past year breached all previous records.
However, it remains to be seen if AT&T will surpass or at least meet its earlier guidance come Thursday.
Verizon has projected that both its 2011 sales and profit would move north by up to eight percent and any downward detraction from that would only indicate that 2012 would be a tough for the company.
The sales jump would likely be achieved as Verizon and its competitors invest on a new high-speed wireless network infrastructure, the long-term evolution technology or LTE, that hopefully will also boost their profit margins.
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