Verizon’s $4B tax break nearly covers its Yahoo purchase
It’s almost like Verizon Communications Inc. bought Yahoo! Inc. on Uncle Sam’s dime.
Last year’s federal tax overhaul saved the largest U.S. wireless carrier $3.5 billion to $4 billion — an amount nearly equal to the $4.5 billion it paid for Yahoo in June.
Verizon got a particularly large tax break because almost all of its revenue comes from the U.S. The company is expecting to pay an effective rate of as little as 24 percent this year, down from about 35 percent.
But even with a multibillion-dollar windfall, Verizon made it clear that it doesn’t plan to do anything flashy with the cash. In other words, there may not be another Yahoo-style purchase in its near future.
The bulk of the money is going toward “strengthening the balance sheet,” Chief Financial Officer Matt Ellis said in an interview Tuesday. The company announced last month that it planned to buy back $3 billion of its bonds.
Verizon also made a $1 billion pension contribution last quarter, in addition to earmarking $400 million in stock for one-time employee bonuses. Another $300 million is going to the Verizon Foundation, its charitable arm.
If the goal of the tax cut was to invigorate capital spending, Verizon isn’t a poster child for the legislation. Even as the company embarks on construction of a superfast 5G network, it has held its expenditures at previously set levels.
Verizon’s approach to spending is “disciplined and methodical,” Ellis said on a conference call. “I don’t see us having a massive acceleration.”