The largest wireless carrier in the U.S., Verizon Communications Inc., said in an official statement that its wireless margins over the fourth quarter of the fiscal year are expected to be negatively affected due to phone discounts and lower prices, which led to a sharp increase of new monthly subscribers.
Although Verizon has been careful when it comes to lowering prices amid fierce rivalry, it has recently launched a series of special promotions as a response to the price cuts offered by its major competitors.
Still, no specific projection has been provided by the U.S.-based company in regard to its fourth-quarter margin. Verizons third-quarter margin for its wireless earnings before interest, tax, depreciation and amortization equalled to 49.5%. In comparison, the same companys margin was 47% in the fourth fiscal quarter of 2013.
Verizon warned that its profits would be put under “short-term pressure” by the promotional offers at the end of the year. The company is making large discounts in order to attract more customers at a time when increasing number of subscribers have been recently leaving Verizons services for other wireless carriers offers during the quarter.
Verizon has been offering new phones at a lower than their actual price in order to attract more customers to its two-year contracts. The heavy customer growth, which came as a result of the phone promotions, also led to lower wireless margins for Verizon.
According to the company, many of its new customers prefer to purchase a device without subsidies instead of signing a two-year contract. The wireless carrier noted that the percentage of such customers doubled from the previous three-month period to reach 24%.
Verizon Communications Inc. was up 0.60% to close at $48.90 per share yesterday, marking a one-year decrease of 1.17%. The company is valued at $201.72 billion. The companys shares traded at €39.11 in Frankfurt as of 8:15 GMT. According to CNN Money, the 26 analysts offering 12-month price forecasts for Verizon Communications Inc. have a median target of $54.00, with a high estimate of $59.00 and a low estimate of $41.00. The median estimate represents a +10.43% increase from the last price of $48.90.
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