Verizon Communications suffered a decline in first quarter profit as it was hit by a series of charges, while its mobile arm – Verizon Wireless – saw a worrying decline in new high-value postpaid subscribers. The New York-based firm posted profit of US$2.28 billion for the quarter, down 29 percent from US$3.21 billion a year earlier. If Vodafone’s 45 percent stake in Verizon Wireless was stripped out, profit was US$409 million, down 75 percent. As was the case with rival AT&T this week, Verizon took a charge of almost US$1 billion (US$962 million) related to the new US healthcare legislation as well as other one-time charges relating to recent mergers and acquisitions. Meanwhile, revenue rose 1.2 percent to US$26.9 billion, thanks to a 4.4 percent gain at Verizon Wireless, which offset a revenue decline of 2.9 percent at the firm’s fixed-line business.

Verizon Wireless added 1.5 million new mobile customers in the quarter (below the net gain of 1.9 million subscribers added at AT&T in the same quarter) to reach 92.8 million in total, a rise of 7.2 percent over the year-earlier period. More worryingly for Verizon was that 1.3 million of these new additions were prepaid customers added primarily through its wholesale agreements with the likes of Tracfone Wireless and Wal-Mart. This meant that the operator added just 423,000 net new contract (postpaid) customers, a third of what was added a year ago and behind the 512,000 added by AT&T in the same period. “The pressing question, of course, is whether these [prepaid] gains are beginning to cannibalise Verizon’s far more lucrative postpaid business,” analyst Craig Moffett of Bernstein Research wrote in a report. Verizon CFO John Killian said the seasonal decline in postpaid customers was magnified in the first quarter but noted that Verizon Wireless’ share of the market (as the largest US mobile operator) had remained largely unchanged.