In a recent earnings report, Verizon Communications stated a loss of slightly over $2 billion in fourth quarter 2011. According to the cellular giant, the loss was primarily due to both one-time charges of $3.4 billion for severance, pension and benefits, and increased subsidy costs for iPhone sales.
However, Verizon's wireless division reported a revenue surge, with more than half of its smartphone sales being iPhones.
In an interview with CNN Money, Verizon CFO Fran Shammo said Verizon had anticipated the Apple business deal to be a losing effort until 2015. He further assured investors that Verizon’s profit margins are on the rise, and he anticipates them to continue to grow as existing customers upgrade to the new 4G LTE network.
Additionally, should Verizon choose to increase its rates in the same manner as rival AT&T, profit could increase, particularly in the data consumption area.
According to Shammo: “We had a strong finish to a very solid year in 2011. We have transformed ourselves into a company well positioned for the growth markets of the future.”
Apple: Smartphone Profit Leader
Holiday sales records show Verizon wireless was up 13%, amounting to $18.3 billion in revenue. Far ahead, Apple reported another quarter of record earnings and sales of more than $46 billion, totaling 37 million iPhones, 15 million iPads and 5 million Macs – for profit of over $13 billion.
Contributing to Apple’s success is its ability to attract new customers away from competitors. According to a study recently released by Consumer Intelligence Research Partners (CIRP), 36% of iPhone users indicated that they switched from an Android, BlackBerry or Palm device.
The study also found that many existing Apple customers begin with a more basic device, such as an iPod or iPhone, and then upgrade as well as add additional devices like Apple TV, AirPort or Time Capsule.
Key Statistics - Global Mobile Market (source: International Telecommunication Union)
- In 2009 and 2010, there were 4.7 billion and 5.4 billion mobile subscribers respectively; there were 6 billion subscribers by the end of 2011, which is the equivalent of 87% of the world’s population.
- At the end of 2011, there were 4.5 billion mobile subscriptions in the developing world, for 76% of global subscriptions.
- In 2010, China and India collectively added 300 million new mobile subscriptions – totaling more than all US mobile subscribers combined.