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Verizon says strike could hurt current-quarter earnings

The company's first-quarter earnings largely matched expectations as it adds 640,000 wireless customers.

Roberto Machado Noa / Getty

Verizon on Thursday posted earnings generally in line with what analysts were expecting, as the company added 640,000 wireless subscribers. However, an ongoing strike by thousands of wireline and TV employees could dent current-quarter earnings.

The company said it earned $4.4 billion, or $1.06 per share, on revenue of $32.2 billion. Analysts were expecting earnings of $1.06, though revenue was slightly shy of the $32.46 consensus estimate, according to Thomson Financial.

"Verizon continues to expect full-year 2016 adjusted earnings to be at a level comparable to the company’s strong full-year 2015 adjusted earnings," the company said in a prepared statement. "However, given the status of labor contract negotiations, there will be pressure on second-quarter earnings due to the timing of cost reductions."

Verizon is also pursuing a bid for Yahoo’s core business, potentially doubling down on last year’s $4.4 billion AOL acquisition.

Although the company saw subscriber gains in wireless, most of those came from tablets, with the number of phone subscriptions declining by 8,000. That was still better than a year ago and a smaller phone decline than some analysts were expecting.

Roughly half of phone subscribers are now using an unsubsidized smartphone while a third are on installment billing. Two-thirds of new phone activations last quarter were on installment pricing plans.

On the wired side of its business, Verizon said it added 98,000 net new Fios Internet connections and 36,000 net new Fios video connections. Revenue in that segment was up 5 percent, to $3.5 billion.

Shares of Verizon dipped slightly in pre-market trading, changing hands recently at $50.52, down $1.23, or more than 2 percent.

Update: In a call with investors, CFO Fran Shammo talked about the continued plans for cost cuts, including in its wireless store, call center and supply chain operations.

As for the company’s Go90 mobile video service, Shammo said he "remained encouraged" in viewership levels, but didn’t offer any specifics and stressed it was early.

"We look forward to expanding our go90 content to other media through our AOL brands and the Web later this year," Shammo said.

As for AOL, Shammo said it had its best first-quarter revenue in five years.

Shammo also clarified what the company is and isn’t doing this year and next with regard to next-generation 5G technology. The company is starting testing this year, with plans for a pilot of fixed wireless (a.k.a. home broadband) service scheduled for next year.

"It’s really not about mobile," he said. "It’s about fixed wireless."

That puts the company’s plans more in line with what the rest of the industry is planning, with AT&T also planning to use variants of 5G technologies to deliver fixed wireless-based broadband service.

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