Holiday Promotions Squeeze Verizon

Carrier Says Discounts Are Hitting Its Bottom Line

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As the promotional war raged in the wireless industry, Verizon largely stayed out of the fray. But not anymore.

On Monday, the nation's largest carrier -- and sixth-largest advertiser -- admitted the competitive pressures of the holiday season are eroding profits. "The company expects that the fourth-quarter impacts of its promotional offers, together with the strong customer volumes this quarter, will put short-term pressure on its wireless segment [earnings]," the company said in a filing.

Verizon did note an acceleration in subscriber upgrade to 4G plans and an uptick in its Edge installment plan. Yet as more subscribers gravitate toward discounted phone offerings it will lead to slimmer margins "in this highly competitive and promotion-filled fourth quarter," the company noted.

The admission is telling. Over the past year, T-Mobile assaulted the larger carriers with deals designed to steal customers. Sprint is piling on too, with new ads promoting its family plan, and AT&T has responded with counter-offers. Now it looks like Verizon is starting to crack. The carrier announced a rare data discount and made a significant investment in holiday promotions, particularly around retail.

In the last quarter, Verizon added 1.5 million postpaid subscribers and total revenue of $21.8 billion, but its earnings per share fell short of Wall Street expectations.

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