Slower Wireless Subscriber Growth Pushes Down Verizon Stock

Wireless carrier Verizon Communications saw its stock fall in early-morning trading as investors reacted to a 20 percent drop in the number of wireless subscribers compared with a year ago.

Verizon Wireless added some 539,000 postpaid subscribers in the quarter — well short of the 677,000 additions from a year earlier. Churn also rose slightly — two factors that reflect the competitive nature of the market.

Verizon’s shares fell more than two percent in wary trading, to $46.36.

Chief Financial Officer Fran Shammo acknowledged the competitive market during the company’s earnings call. He said Verizon responded to the changing environment by introducing a low-end EDGE installment payment program, which would allow price-conscious customers to upgrade to a smartphone on the network.

At first blush, Verizon’s earnings were arresting. The nation’s largest wireless provider’s reported net income rose to $3.9 billion for the quarter ending in March, up dramatically from the nearly $2 billion it reported a year ago. Earnings per share rose to $1.15 — up nearly 70 percent from the per-share earnings of 68 cents a year ago.

However, those results reflect an after-tax gain of $1.9 billion related to its just-completed deal to acquire Vodafone’s 45 percent interest in Verizon Wireless. Verizon completed the $130 billion transaction to gain full ownership of Verizon Wireless in February.

Excluding the one-time item, Verizon said its first-quarter profit was 84 cents a share — falling short of the consensus estimate of 86 cents. And those improved results incorporate the benefits of more than a month of total control of Verizon Wireless.

Verizon saw a surge in tablet use with the addition of 634,000 subscribers in the quarter, and Shammo told investors he expects tablets to be a major source of growth during the year.

Verizon’s wireline business saw its total revenue fall to $9.8 billion, off 0.4 percent from the same time in 2013, as enterprises kept tight reins on spending. Shammo told investors he didn’t expect that to change, with a climate of uncertainty in Washington, D.C.

However, the company’s FiOS business, which provides Internet and video to residential and business subscribers, saw a 15.5 percent rise in revenue to $3 billion. Verizon added 98,000 net new Internet subscribers and 57,000 net new video customers.

Verizon projected revenue would rise by four percent in 2014 from gains in both wireless and wireline businesses.

This article originally appeared on Recode.net.