Apple iPhone Will Drag Down Telecom Profits

The iPhone is both a customer draw and -- at least initially -- a margin killer for telecom companies. That’s how the fourth quarter will look for Verizon, AT&T and Sprint in the first quarter of sales for the iPhone’s latest iteration, according to an analysis from Wells Fargo.

Because of subsidies being given to consumers, the more iPhone demand, the bigger the hit to this quarter’s bottom line. Wells Fargo hikes its expectations for Verizon Wireless iPhone activations by 29% to 4.5 million, but Wells trims a penny from its expectations of Verizon’s quarterly earnings, to 54 cents a share. Wells also holds its outlook on total subscriber growth for contract customers at 1.3 million, even with the third-quarter figures. Verizon shares are 1.6% higher today, to a four-year high as the stock price continues a recent string of gains. (Dec 23)