Why Verizon Communications Inc. (NYSE:VZ) Need To Pay $3.4 Million As Settlement Fine?

Verizon Communications Inc. (NYSE:VZ) need to pay $3.4 million to resolve a U.S. government investigation. The probe was related to the case registered back in April 2014 when its 750,000 subscribers in California failed to contact emergency operators during a 911 outage. The FCC stated that the company failed to inform officials about the problem in time. The six-hour long outage affected as many as eleven million people in total.

Do analyst foresee a momentum shift in VZ?

The statements

Tom Wheeler, who is the Chairman of FCC, stated that the U.S. residents must have confidence that they will get timely assistance of 911 in an emergency. The government seriously considers its responsibility to ensure that the 911 systems function unfailingly. The team of FCC will continue to work with service providers to make sure that any changes or advancements in 911 systems results in improved and better communications between first responders and citizens. As part of the settlement process, Verizon will also follow a compliance plan to address 911 failures in the coming period.

The financial performance

The settlement news came just one day after Verizon reported its 4Q2014 results. The company recorded 2.1 million net retail connections in 4Q, out of which 2 million were postpaid connections. Now, the total retail connections at the end of FY2014 stand at 108.2 million. It is an impressive 5.5% surge over FY2013. The connection numbers are impressive as the company succeeded in making its place despite the aggressive pricing strategies offered by its peers. Verizon didn’t opt for aggressive pricing strategies and still managed to post growth YOY.

The future ahead

Fran Shammo, the CFO of Verizon Communications Inc. (NYSE:VZ), said that the company expects cancelations to rise in FY2015. However, it is not related to the pricing strategies. The pricing is not a big issue as shown by the media. The fact is there is a shift happening between service revenue to equipment, and it is the reason that can affect the number of retail connections in 2015.

Scott Sally

Scott Sally

Sally joined the US Markets Daily News Team in April 2011 as a Multimedia Journalist.