Shares of Verizon, which is in the process of buying Yahoo Inc's (YHOO.O) core assets as a way to diversify, were down 4.4 percent at $50.09 on Tuesday.
Verizon added 591,000 retail postpaid subscribers - those who pay their bills on a monthly basis - in the quarter overall, fewer than the 726,000 analysts had expected, according to market research firm FactSet StreetAccount.
Chief Financial Officer Matt Ellis said in an interview that the company's 167,000 phone subscriber additions were strong. “The biggest area where people were probably off was tablets,” he said. “We didn’t run as many tablet promotions this quarter.”
But analysts said the results illustrated how Verizon is facing intensifying competition from wireless rivals such as T-Mobile U.S. Inc (TMUS.O) and Sprint Corp (S.N).
Customer defections among Verizon's wireless retail customers who pay bills on a monthly basis increased to 1.10 percent of total wireless subscribers, compared with the average analyst estimate of 1.05 percent, according to FactSet. "The soft results in wireless serve as a stark reminder that, despite all of the understandable enthusiasm around possible regulatory reform, tax reductions, and possible consolidation, the wireless industry is still a relatively inhospitable place," wrote Craig Moffett, analyst at MoffettNathanson.
Verizon said in July that it would buy Yahoo's core internet properties in a push for new sources of revenue, but the deal has been cast into doubt by data breaches disclosed by Yahoo last year.
Yahoo said on Monday that its deal with Verizon was expected to wrap up in the second quarter instead of the first quarter. Yahoo shares were up 3 percent at $43.63.
Ellis said the delay was unsurprising and that Verizon was still working to assess the financial impact of the breaches.
Net income attributable to Verizon fell to $4.5 billion, or $1.10 per share, in the three months ended Dec. 31 from $5.39 billion, or $1.32 per share, a year earlier.
Excluding items, the New York-based company earned 86 cents per share, missing the average estimate of 89 cents, according to Thomson Reuters I/B/E/S.
Verizon's operating revenue fell to $32.34 billion, from $34.25 billion in the same period of 2015. Analysts had expected revenue of $32.08 billion.