Verizon corporate sales fall, pension hit seen

NEW YORK (Reuters) - VERIZON (VZ.NY)Communications Inc reported fewer-than-expected wireless customers and weakness in corporate sales for the fourth quarter and warned that pension costs would hurt earnings in 2009, dragging its shares down as much as 6.5 percent.

The results showed the No. 2 U.S. phone company was not immune to the recession and plunging global markets, although analysts were impressed by strong growth in Verizon's FiOS television and high-speed Internet subscribers.

Verizon said on Tuesday that quarterly profit rose to $1.2 billion, or 43 cents a share, from $1.1 billion, or 37 cents a share, a year earlier.

Adjusted earnings per share before items fell to 61 cents from 62 cents. That was a penny below the analysts' average forecast of 62 cents, according to Reuters Estimates.

Bernstein Research analyst Craig Moffett said a decline in Verizon Business, which mostly serves corporate customers, was the biggest surprise.

Business revenue fell 2.3 percent year-over-year, Verizon said, citing delayed decision making. The division accounts for slightly less than a quarter of overall revenue.

"The downturn in enterprise was steeper and worse than we expected," Moffett said, adding that "things could get much worse in 2009."

Verizon's overall revenue rose 3.4 percent to $24.6 billion, roughly in line with market expectations.

The company said pension and other post-retirement expenses would hurt 2009 earnings by 9 to 11 cents per share, joining a growing number of companies being forced to fill funding gaps due to turmoil in financial markets.

FIOS THE BRIGHT SPOT

But some analysts said they were impressed with growth in FiOS, which competes with cable service providers. Verizon reported 303,000 net new FiOS TV customers and 282,000 FiOS Internet customers for the quarter, the biggest gains ever, helping to offset the loss of traditional wireline subscribers.

"FiOS is really beginning to rock and roll, although wireless net adds were a little bit soft," said analyst Christopher King of Stifel Nicolaus Telecom Equity Research.

Verizon Wireless, owned by Verizon and Britain's Vodafone Group Plc , said it had added 1.4 million net subscribers in the quarter, compared with the analysts' average forecast of about 1.5 million. It added 2 million in the year-earlier quarter.

Verizon closed its acquisition of rural wireless provider Alltel Corp in early January. The merger created the biggest U.S. wireless provider by surpassing AT&T Inc in terms of subscribers.

Verizon shares were down 3.8 percent at $29.81 by late-morning New York Stock Exchange trading. Earlier they had been as low as $28.96, a decline of more than 6.5 percent.

(Additional reporting by Sinead Carew; Editing by Gerald E. McCormick and Lisa Von Ahn)