Wednesday, January 29, 2014
High Margins at Verizon Wireless Unlikely to Last
For the fourth quarter of 2013, Verizon Communications (NYSE: VZ ) reported a surge in operating margins in the wireless sector due to lower subsidies for new accounts. The question is whether the wireless provider can continue generating these higher margins with Sprint Nextel (NYSE: S ) and T-Mobile (NYSE: TMUS ) in customer-acquisition mode.
While Verizon is generating solid gains in FiOS Internet and video segments, the company is increasingly dominated by its wireless division. In total, fourth-quarter revenue only gained 3.4%, but the company was able to hold expenses down. The combination sent operating margins surging, but the lack of spending to attract new customers could hurt growth in 2014 and beyond.
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