Verizon to Share Tax Savings With Staff -- WSJ
January 24 2018 - 3:02AM
Dow Jones News
Windfall of as much as $4 billion also to go toward paying down
carrier's hefty debt
By Ryan Knutson and Austen Hufford
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (January 24, 2018).
The new tax law will put as much as $4 billion extra cash in
Verizon Communications Inc.'s pocket this year.
The telecommunications giant said it would use the funds to pay
down some of its $117 billion debt, donate $200 million to $300
million to its charity, and give almost all of its 155,000
employees 50 shares of Verizon stock. The shares, which currently
trade around $53, will be priced Feb. 1 and vest over two years.
Verizon said the employee stock award is worth about $380
million.
The windfall comes as Verizon's business is humming. On Tuesday,
the carrier said it had turned around two years of declining
revenue in its wireless unit, increasing revenue by 1.7% from a
year earlier to $23.8 billion. Verizon also added 1.2 million
postpaid connections, 431,000 of which were phones.
Verizon said the tax law wouldn't result in increased network
spending because the company has always been disciplined about its
deployment strategy.
"It's very inconsistent that just because tax reform comes
through, we are all of a sudden going to draw the line at a
different place or lose that discipline," Verizon Chief Executive
Lowell McAdam said on a call with analysts. "What tax reform does
do is gives us great flexibility that once we prove to ourselves
that we can get a reasonable return on invested capital, we can
accelerate very rapidly."
One thing Mr. McAdam said Verizon won't spend money on now: A
major acquisition of a media company. "I can say unequivocally,
there is nothing going on right now with us considering a large
media play."
Instead, Verizon wants to remain neutral amid all the disruption
in the media space, which will allow it to strike distribution
deals with many content companies, rather than being tied to a
single producer.
"It's great to be in the content business if you're making good
content, " Verizon's finance chief, Matt Ellis, said in an
interview. But "just because you're making good content today,
there's no guarantee next year will be good. If you're in the
distribution space, you're not dependent on the creative success
from any one studio."
That thinking contrasts with its counterpart AT&T Inc.,
which agreed to spend $85 billion on Time Warner Inc., which owns
HBO, CNN and the Warner Bros. film studio, in 2016. The Justice
Department is suing to block that deal.
Verizon ended the year with 116.3 million total wireless
connections, up from 114.2 million in the same quarter the previous
year and 115.3 million in the third quarter.
In addition to the $3.5 billion to $4 billion in 2018 cash
savings from the tax law, Verizon also reduced its deferred tax
liabilities by $16.8 billion.
While Verizon's home TV business struggles -- it lost 29,000
Fios video customers in the quarter, down from 21,000 additions in
the year-ago period -- its nascent digital media business is
showing signs of life. Oath, a unit composed of Yahoo and AOL
properties, had $2.2 billion in revenue in the quarter, up 10% from
the previous quarter, driven by holiday advertising spending.
Fewer people upgraded to new smartphones in the quarter, a sign
that people are hanging onto smartphones longer and possibly a bad
sign for Apple Inc.'s iPhone X. Verizon's phone upgrade rate was
7.2%, down from 8.3% the previous year.
In all, Verizon posted a profit of $18.67 billion, or $4.56 a
share, compared with a profit of $4.5 billion, or $1.10 a share, a
year ago. The boost was a result of the one-time $16.8 billion
reduction of its deferred tax liabilities. Excluding the tax law
related gain and other items, the company posted adjusted earnings
per share of 86 cents, the same as the fourth quarter of 2016,
slightly below analyst expectations of 88 cents.
Write to Ryan Knutson at ryan.knutson@wsj.com and Austen Hufford
at austen.hufford@wsj.com
(END) Dow Jones Newswires
January 24, 2018 02:47 ET (07:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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