Verizon Communications expects President Trump's tax reform to boost its profits posted in the final quarter of 2017, the telecom giant revealed as part of its Wednesday filing with the United States Securities and Exchange Commission. The wireless carrier's net deferred income tax liabilities are predicted to decrease by approximately $16.8 billion over the quarter and should provide an isolated boost to the company's financials that won't be repeated going forward. Based on the firm's general outlook, the Tax Cuts and Jobs Act contributed to around $4.10 in extra earnings per share for the entire 2017. Despite the temporary boost, Verizon's cash flow statement for the entire year won't be changed.
The mobile service provider's retained pre-tax earnings are also expected to increase by $600 million to $4.6 billion due to an accounting change revamping the manner in which it manages standing contracts. The move was implemented on January 1st and hence won't affect Verizon's Q4 and full-year 2017 results but is poised to have a "significant impact" on the company's operating results in 2018, largely due to the new method used for managing upcoming commission costs of its wireline and wireless units, as well as wireless subsidy contracts and retained earnings, i.e. the cumulative adjustment of the thereof.
The takeaway from the filing is that Verizon will be able to pay less tax on its latest earnings but won't have its operations affected in the long-term, nor will it be able to benefit from a reduced repatriation tax included in the bill signed by President Trump late last year, primarily because the legislation is meant to encourage American businesses with a large international presence to bring more of their foreign cash reserves home at a reduced tax rate. Wireless carriers like Verizon are largely focused on the domestic market and hence aren't able to take advantage of the offer to achieve significant savings. For similar reasons, the New York-based company doesn't expect to see any benefits of the territorial tax system defined by the recently approved bill which reduces the corporate tax rate to 21 percent, down from 35 percent. Verizon's 2018 operations are said to be largely focused on 5G and its efforts to deliver a fixed wireless access solution to select cities in the second half of the year before moving to the deployment of a truly mobile service in early 2019.