Tough competition in the wireless sector and layoff costs dealt a huge blow to Verizon Communications which suffered a fourth quarter loss of $653 million.
The country’s biggest wireless carrier posted a 23 cents loss per share. Verizon attributed the loss mainly to layoff costs consisting of $3 billion severance charge, among other things.
As more customers opt to use cellphones instead of landlines, Verizon’s revenue from its traditional wireline services shrank 3.9 percent to $11.5 billion compared to the same period in 2008.
According to Verizon CEO Ivan Seidenberg, the company continues to suffer from the effects of the bad economy.
“We’re facing some more significant headwinds than we thought we would face from the economy,” Seidenberg said.
He added, however, that Verizon is optimistic that it will recover in 2011. John Killian, Verizon’s chief financial officer, echoed the same sentiments, saying that the company would continue to reduce costs to save its corporate and residential wireline phone businesses from dipping further.
As part of its cost-cutting measures, Verizon, which employs 223,000 people, got rid of some 26,000 jobs in its wireline sector over the last two years.
Slashed prices
Just two weeks ago, the company cut prices on some of its monthly plans, reducing its unlimited voice plan from $99 to $69.99. It also introduced a new unlimited voice-and-text plan for $89.99. Unlimited plan that includes 5GB of data is now priced at $119.98.
For family plans with two lines, the new pricing scheme is $119.99 for unlimited family plans and $149.99 for unlimited family voice-and-text plan.
The development left AT&T subscribers green with envy—but not for long. A few hours after Verizon made the announcement, AT&T followed suit with its own price cuts, and the changes in plan prices for both companies took effect on the same day, January 18.
AT&T’s new pricing options for unlimited talk on a single line now costs $69.99 and unlimited talk and text for $89.99. Unlimited texting add-on is still at $20. Subscribers of both wireless providers can switch to these new pricing options without penalty or contract extension.
The pricing competition between AT&T and Verizon not only means that customers will be benefitting with cheaper costs for mobile use; it also shows that wireless carriers are trying to increase revenues by levering users’ preference for mobile Internet access.
Both companies now require customers to buy data plans for high-end mobile phones. Verizon customers must sign up for a $10, 25 megabytes per month package option if they buy a 3G phone or multimedia phone. The company has decided to phase out the $20 monthly plan for 75 megabytes.
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