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Apple iPhone 4S

The Basking Ridge, N.J.-based carrier's profits diminished despite signs of growth. On one hand, the company signed up 1.2 million wireless users, but the company posted losses spurred by increased expenses, disappointing shareholders.

Most new subscribers chose the iPhone, which Verizon sells at a loss to encourage customers to buy two-year contracts. As a result, increased iPhone subscribers lessened Verizon's profits, because Verizon absorbed most of the iPhone's handset cost.

One way Verizon may stem the tide is by moving new iPhones customers into data plans, viewing its Apple deal as necessary to keep growing subscription rates as it moves to 4G. Android phones failed to move off the shelves as analysts predicted, so Verizon is relying on Apple customers to bring in the necessary data subscribers.

Verizon CEO Lowell McAdam highlighted the long-term gains expected from their strategy, noting "Verizon Wireless produced particularly strong growth in the fourth quarter. While that diluted wireless margins in the short-term, it is good news for revenue and margin growth over the long-term, particularly given our leadership in the rapidly developing 4G LTE ecosystem."

Verizon expects data sales and revenue from smartphone contracts to negate the costs it endures subsidizing handsets. The start-up costs for these contracts increases if users choose iPhones, but the profit margin will be ample as long as customers use data and complete their contracts.

Verizon anticipates a leap in data usage, illustrated by its decision to beef up its 4G service. The company is optimistic consumers will use increasing amounts of data, which will amp up data costs and give the company higher profit margins in the future.

The company canceled its unlimited data plan last year preparing for the next iPhone model. Its switch to a tiered system is bringing in increased profits, especially as data-gobbling video streaming grows more popular.

Verizon's future looks bright, despite its lackluster quarterly report. Still, the number of subscribers the company gained this year is expected to translate to larger profits in coming years.