Verizon mobile margins to fall on iPhone sales

Verizon Wireless said it expects to report a decline of up to 6 percentage points in its fourth quarter profit margins as costs rose on strong sales of Apple Inc iPhone and other devices.

Verizon Wireless is a venture of Verizon Communications and Vodafone Group Plc .

Verizon Communications Chief Financial Officer Fran Shammo said during a webcast of an investor conference that the wireless company had sold 4.2 million iPhones in the fourth quarter, bringing it "extremely close" to its target for 11 million sales in 2011.

Verizon Wireless, the biggest US mobile service, also sold 2.2 million smartphones that run on its high-speed wireless network, Verizon said on Wednesday.

As a result its wireless profitability came under pressure in the quarter as the operator pays a higher subsidy to encourage consumers to buy advanced phones in exchange for locking them in to a two-year contract.

This would mean that margins will drop to a range 42-43% in the fourth quarter from 47.8% in the third quarter.

Shammo also said the company ended the year with a backlog of 120,000 iPhone orders.