Verizon revenue drops as subscriber additions disappoint

October 20, 2016 7:37 AM EDT

The Verizon logo is seen on the side of a truck in New York City, U.S., October 13, 2016. REUTERS/Brendan McDermid


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By Aishwarya Venugopal and Malathi Nayak

(Reuters) - Verizon Communications Inc added fewer than expected wireless subscribers in the third quarter due to intense competition, and indicated it may renegotiate a deal to buy Yahoo Inc after a breach of Yahoo user email accounts.

As its bread-and-butter wireless operations struggle in a saturated phone market, Verizon had said in July it would buy Yahoo's core business for $4.83 billion to drive growth in advertising and media.

The company said on Thursday total operating revenue in the quarter fell 6.7 percent to $30.94 billion, from $33.16 billion. Analysts had expected revenue of $31.14 billion, according to Thomson Reuters I/B/E/S.

Shares of Verizon, the No.1 U.S. wireless company, slipped 2.7 percent to $49.04 in afternoon trading. The stock has gained more than 6 percent this year so far.

Verizon added a net 442,000 retail postpaid subscribers, who pay their bills on a monthly basis. This was significantly below analysts' estimated 766,300, according to market research firm FactSet StreetAccount.

Subscriber growth in the third quarter was partly hurt by a recent recall of the Samsung Note 7 smartphone due to the risk of overheating and catching fire, and a backlog in orders for Apple's new iPhone 7, Verizon executives said.

Smaller rivals, such as T-Mobile US Inc and Sprint Corp, have rolled out aggressive promotions to win over Verizon's subscriber base.

YAHOO DEAL

To fend off rivals in a maturing wireless market, it acquired AOL in 2015. Verizon's planned purchase of Yahoo will give it digital web properties and ad technology tools, allowing it to compete with internet giants like Facebook Inc and Alphabet Inc's Google.

"It will take years to find out if their advertising strategy pans out," MoffettNathanson analyst Craig Moffett said in a note.

Verizon's general counsel has said that a Yahoo data breach reported in September, which involved 500 million email accounts, was a material event that could allow Verizon to back out of the deal.

Verizon was still evaluating what the data breach may mean for the Yahoo transaction, Verizon's Chief Financial Officer Fran Shammo said in an interview.

"We're going to have to wait to see and get the facts...before any final decision is made," Shammo said.

Net income attributable to Verizon fell to $3.62 billion, or 89 cents per share, in the third quarter ended Sept. 30, from $4.04 billion, or 99 cents per share, a year earlier.

Excluding items, the company earned $1.01 per share, beating the average analyst estimate of 99 cents per share.

(Reporting by Aishwarya Venugopal in Bengaluru and Malathi Nayak in New York; Editing by Bernadette Baum)



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