Verizon is paying a high price for facing the realities of a faltering wireline business.
The New York telecommunications behemoth announced on Wednesday that it would take a non-cash charge of $5.8 billion to write down the value of its Verizon Business Group in the fourth quarter. The move will be reflected in the company’s fourth-quarter earnings, which are slated to be released on Tuesday.
The write-down follows Verizon’s five-year strategic evaluation of its Business unit. The end result was a set of financial predictions that were lower than the previous five-year planning cycle.
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The company, which delivers data and phone services to businesses and government bodies, has long struggled owing to cord cutting by customers, who are increasingly switching to cellular plans. Verizon also faced greater competition, notably from new companies like T-Mobile and rival AT&T.
Following the move, Verizon announced that the Business unit’s goodwill balance was $1.7 billion as of December 31.
Verizon’s Business unit reported a 4% decrease in sales to $7.5 billion in the third quarter, with operating income falling 22.8% to $539 million. While its business wireless unit witnessed a rise in revenue, it was insufficient to overcome decreases in its wireline division.
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