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Verizon says it'll take a while to figure out how the Yahoo hack affects their deal

Verizon says it'll take a while to figure out how the Yahoo hack affects their deal
A hack that affected at least 500 million Yahoo accounts has raised questions about whether Verizon will ask for a discount or other changes to their deal. (Ritchie B. Tongo / European Pressphoto Agency)

Verizon Communications Inc. is still evaluating how the hack at Yahoo Inc. affects its $4.8-billion agreement to buy the Internet company's core assets, and it said figuring out the effects on the deal will be a "long process."

Verizon is interested in Yahoo because it wants to build an online advertising arm that could rival Google and Facebook. But a massive hack that netted personal information from at least 500 million users' Yahoo email accounts has raised questions about whether Verizon will ask for a discount or other changes.

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Verizon said Thursday that it expects the Yahoo deal to build its digital media business, but Chief Financial Officer Fran Shammo said on a call with analysts that Verizon has to assume the breach "will have a material impact" on Yahoo, echoing comments from Verizon's general counsel last week. Shammo said evaluating what that means for its deal is going to be a "long process" and Verizon hasn't reached a final conclusion.

The hack, which took place in 2014 and was revealed last month, is not the public's only concern about Yahoo email.

In recent weeks, there have been reports that the Sunnyvale, Calif., company scanned incoming user emails for the federal government. Now, Yahoo is asking the government to clear the air.

Earlier this month, Reuters reported that Yahoo searched hundreds of millions of emails for specific information at the government's request, raising concerns about secret government surveillance programs. Yahoo called the Reuters story "misleading" and declined to comment on a subsequent New York Times story.

Yahoo said that although it can't respond in detail to these stories, the government can. In a letter to James Clapper, the director of national intelligence, it asked the government to confirm whether it issued such an order, to declassify the order if it exists and to make a public comment that clarifies the situation.

A national-intelligence spokesman said the agency will reply to Yahoo.

On Thursday, Verizon also said its own profit fell in its most recent quarter as it added fewer subscribers for its traditional cellphone business.

In its largest division, selling Internet service to millions of wireless customers, Verizon is dealing with increasing competition. It added 442,000 subscribers that pay each month, the more lucrative kind of wireless customer. That's down 66% from a year earlier. The company said its phone business was hurt by rivals introducing new unlimited plans, the recall of the fire-prone Samsung Galaxy Note 7 and a backlog for the iPhone 7 that came out in September.

And "churn" — a measure of how many customers are canceling their service — rose, which Verizon said was mostly because of tablet-customer defections.

The New York company also said that it was rebounding in its home Internet and cable business, which had been hit by a strike of almost 40,000 employees earlier in the year. It added 90,000 home Internet customers for its FiOS service, down 6% from a year earlier, and 36,000 cable customers, down 20% from a year earlier.

Overall, Verizon reported net income of $3.62 billion, or 89 cents per share, in the three months that ended Sept. 30. That's down from $4 billion, or 99 cents per share, in the same quarter last year.

Earnings, adjusted for non-recurring costs and severance costs, were $1.01 per share, topping Wall Street expectations. The average estimate of 14 analysts surveyed by Zacks Investment Research was for earnings of 99 cents per share.

Revenue fell nearly 7% to $30.94 billion in the quarter, which missed expectations. Seven analysts surveyed by Zacks expected $31.14 billion.

Shares of Verizon fell 2.5% to $49.14 on Thursday. The price is up more than 8% over the past year.

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UPDATES:

1:50 p.m.: This article was updated with Verizon shares' closing price.

This article was originally published at 10 a.m.

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