Margins, mobile critical for AT&T, Verizon reports this week

Industry stakeholders will gain insight into how well telecom margins are holding up this week in the face of mobile price wars, as both Verizon (VZ: NYSE) and AT&T (ATT: NYSE) release their fourth quarter 2009 financial results. 

Both companies have added millions of wireless subscribers in recent months, and both are expected to announce the addition of at least 200,000 fiber customers in fourth quarter, reports MarketWatch.com.  But both companies continue to face erosion in their traditionally higher margin landline business.

Increased spending on wireless advertising during fourth quarter also is expected to add to pressure on the companies’ margins. When the popularity of the Apple iPhone caused service-impacting congestion on AT&T’s network, Verizon Wireless—which is part-owned by Vodafone--launched a predatory advertising campaign, to which AT&T responded with a competitive campaign itself.

Another concern for Verizon Wireless is the steep subsidies it has been offering on its popular Motorola Droid device, based on Google’s Android software. As a result, operating margins for Verizon Wireless are expected to drop to the 39% range for fourth quarter, Marketwatch.com reports.

AT&T, meanwhile, is expected to see an increase in its wireless operating margins, which decreased last year when the company increased subsidies on its popular iPhone. Even with the increase, however, AT&T’s wireless operating margins are expected to be in the 36% range for fourth quarter.

Overall, Verizon is expected to report earnings of 55 cents a share on revenue of $27.32 billion, according to analysts surveyed by FactSet Research, while AT&T is expected to show earnings of 51 cents a share on revenue of $30.87 billion. 

Verizon’s earning announcement will be on Tuesday, Jan. 26 at 8:30 a.m. EST.

 AT&T’s report will follow on Thursday.

Look for ConnectedPlanet coverage on developments from both companies later this week.