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Verizon's Business Not Likely To Be Impacted By NSA Revelation

Analysts said a report that Verizon Communications was forced to turn over phone records to the U.S. government is unlikely to impact its business. In fact, investors sent shares of its stock up $1.67, or 3.5%, in trading Thursday.

Last updated on July 3, 2018, at 12:08 p.m. ET

Posted on June 6, 2013, at 5:18 p.m. ET

John Minchillo / AP

Fallout from the U.S. government's indiscriminate monitoring of Verizon Communications customers' phone records didn't hit the telecommunications giant nearly as hard as it hit the Obama administration.

To be sure, analysts said that Verizon is unlikely to see any near- or long-term impact on its business despite the revelation in a report by U.K. newspaper The Guardian that it was ordered to release call logs and other customer data to the U.S. government.

Verizon shares actually closed trading Thursday higher than they opened, gaining $1.67, or 3.5 percent, to end the day at $49.97. They even cracked the $50 per share mark at one point during the trading session.

The Guardian reported that the National Security Agency (NSA), by court order, had been given access to all of Verizon's domestic phone records, but not the exact content of customers' phone and data interactions. The court order, which spans from April 25 to July 19, also required Verizon not to divulge the situation.

Verizon has just over 98.9 million wireless customers and 22.2 million landline customers, according to its most recent earnings report.

Analysts said any fallout for Verizon should be brief, especially if reports emerge of other wireless companies complying with the NSA's request for the information.

"It's kind of bad luck for Verizon that this is the document the Guardian happened to get a hold of," said Jan Dawson, Chief Telecoms Analyst at Ovum. "Chances are there's a similar document out there for AT&T, Sprint and T-Mobile. Ultimately, Verizon legally has to comply with whatever the NSA says they have to do. Customers might not like it, but it's not Verizon's decision unfortunately."

Added Dawson: "It's the kind of thing that people get very excited about for a day or two and then it kind of blows over. Don't expect any lasting impact for Verizon on this."

Other phone companies could very well could be involved. In 2006, USA Today reported that a similar request was made of AT&T, Verizon and BellSouth, which was later acquired by AT&T. What's more, an expert told the Washington Post that the most recent order was likely a routine renewal of the 2006 request by the government, which included the phone records of tens of millions of Americans.

However, if it turns out that Verizon was singularly subject to the NSA request, then it could raise the question of why only them and create some issues for the company.

"Verizon will have to start explaining why," said Jeff Kagan, an independent telecommunications analyst with more than 25 years of experience in the sector. "I don't think customers are going to switch carriers at this point. If it turns out to be just a Verizon story, then all bets are off."

So far Verizon has made no public comment, most likely because it was ordered not to as part of the NSA's request. They did send around an internal memo to employees from Executive Vice President and General Counsel Randy Milch essentially stating that their hands are tied in situations such as this, but stopped short of acknowledging the order's existence.