Verizon, the second-largest US telephone firm, has seen its profits fall 38% after it was hit by costs to build a new fibre-optic cable network.
Also knocked by a one-off tax charge, for the last three months of 2006 its net profit fell to $1bn (£510m), down from $1.7bn for the same time in 2005.
Verizon's fourth-quarter revenues totalled $22.6bn, a 26% rise on the $17.9bn earned a year earlier.
Despite the dip in profits, the results were ahead of Wall Street expectations.
Verizon is boosting its cable network to help it increase broadband and TV service revenues in the future.
Analysts were particularly pleased with the latest customer numbers at Verizon's mobile phone subsidiary Verizon Mobile.
It added 2.3 million customers during the fourth quarter, a 15% rise on a year earlier.
Verizon Mobile is joint owned with UK firm Vodafone.