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Earnings Preview: Verizon to report 4Q results

NEW YORK (AP) -- Verizon Communications Inc., parent of the country's biggest wireless carrier, is expected to report Tuesday on results for the October to December period, the first full quarter of iPhone 5 sales.

WHAT TO WATCH FOR: Verizon took some of the mystery out of the quarter on Jan. 7, when it said it had activated a massive 2.1 million net new devices on its contract-based plans. That's a record, and well above expectations. The company is helped not just by the launch of the iPhone 5 on Sept. 21, but by data plans it introduced over the summer that make it cheaper to connect more devices, like tablets, to the network.

Record activations are not an immediate blessing, however. Verizon sells smartphones at a loss and then makes back the money over the life of a two-year contract, so a sudden surge in sales reduces its profit for a quarter.

The effect of the phone sales on net income will be swamped by another effect, however. Verizon said it will take a charge of $7 billion to $7.5 billion, before taxes, to reflect changes in its pension liabilities. The company recalculates these liabilities every fourth quarter.

It also said repairs after Superstorm Sandy cost it $1 billion, of which a third will be covered by insurance.

WHY IT MATTERS: Verizon Wireless sends out bills for 96 million wireless devices, and there are millions more on the network through wholesale access deals. Verizon Communications still has 23 million landlines as well. The stock is a component of the 30-stock blue-chip Dow Jones industrial average.

Verizon's report marks the debut for telecommunications companies this earnings season. Rival AT&T Inc. reports on Thursday.

The company reports amid turmoil in the lower ranks of the wireless industry, with No. 3 Sprint on track to selling a 70 percent stake to Softbank Corp. of Japan and No. 4 T-Mobile USA striking a deal to buy No. 5 MetroPCS Communications Inc. Because of its size, Verizon is somewhat aloof from these intrigues.

WHAT'S EXPECTED: Analysts polled by FactSet on average expect Verizon to report earnings of 52 cents per share on revenue of $29.8 billion.

LAST YEAR'S QUARTER: Verizon reported a loss of 71 cents per share for the fourth quarter of 2011, due to adjustments in the value of its pension funds. Excluding non-operational items, it earned 52 cents per share. Revenue was $28.4 billion.