Verizon Communications Inc posted a lower quarterly profit and said it would cut 8,000 jobs in its wireline business, as weakness in wholesale and corporate segments overshadowed wireless growth.
Verizon, whose shares fell 1.5 percent on Monday morning, said it would accelerate cost cuts in its landline business, with new layoffs amounting to 3.4 percent of its workforce totaling 235,000 employees. They come on top of 8,000 job cuts in the last year.
Clearly the broader economic issues are affecting the business, Chief Financial Officer John Killian told analysts on a conference call.
The company said that some of the job cuts will affect contract workers as well as internal employees. It did not break out the split.
In addition to short term cost cuts Verizon would also need to more significantly reduce the wireline cost structure over the next 12 to 18 months, Killian said.
Verizon's second quarter results were largely in line with Wall Street expectations. While revenue rose 0.2 percent in its mass-market landline segment, including home phones and small businesses, that was offset by declines in the wholesale and enterprise business.
Operating revenue rose 11 percent to $26.86 billion in the second quarter, and compared with the average analyst estimate of $26.85 billion, according to Reuters Estimates.
Subscriber growth at Verizon Wireless and its biggest rival AT&T Inc probably means that customers switched from smaller rivals such as Sprint Nextel Corp and T-Mobile USA, owned by Deutsche Telekom, said Hudson Square Research analyst Todd Rethemeier.
It's reassuring that both Verizon and AT&T had good postpaid subscriber growth but it's somewhat worrisome for Sprint and possibly T-Mobile USA, who have yet to report, he said.
Verizon's second-quarter profit fell to $3.16 billion, or 52 cents per share, from $3.4 billion, or 66 cents a share, in the same quarter a year earlier.
Excluding items such as merger integration and pension charges, profit was 63 cents per share, in line with analysts' average estimates, according to Reuters Estimates.
On Friday, Verizon Wireless, the biggest U.S. mobile service, said it added 1.1 million wireless subscribers in the quarter.
AT&T Inc said last week that it added 1.4 million net new customers.
Verizon, which owns Verizon Wireless with Vodafone Group Plc, said that before merger costs and other items, wireless margins on earnings before interest tax, depreciation and amortization rose 0.7 percent to 46.3 percent.
In comparison AT&T margins were hurt by hefty costs from subsidies for Apple Inc's iPhone.
Verizon shares fell 50 cents $30.96 on the New York Stock Exchange.