Verizon's Margins Stood The Test, AT&T's Didn't

Verizon (VZ) reported its third quarter earnings a few days back, reporting earnings per share of 56 cents, an improvement of almost 15% over the third quarter of the previous year. Despite the 10% drop in wireline revenues, the company's wireless segment showed good growth and compensated for the decline, largely through its share everything plan and higher bills on smartphone usage. The major concern regarding Verizon's earnings release was the fact that Apple Inc. (AAPL) launched its flagship iPhone5 sooner than expected, perhaps due to the fear of losing market share to Samsung. Selling smartphones comes with costs to telecom carriers as they have to subsidize the phones to lure customers to their networks, and those costs have a direct impact on their margins. Even though telecom carriers that carried the iphone5 were faced with a shorter selling period in the third quarter, there remained concerns of margin erosion with regards to companies such as AT&T and Verizon, as they have historically sold the highest number of iPhones in the US market. AT&T sold a total of 3.7 million iPhones in Q2 2012, around a million more than what Verizon managed to sell in the same quarter. Read more