Robust demand for iPhones and Android devices helped Verizon achieve strong third-quarter earnings even after a two-week-long union strike and Hurricane Irene in August.
Consumer demand for iPhones
and Android devices and its 4G Long-Term Evolution wireless network boosted
Verizon's third-quarter performance, company executives said during its Oct. 21
earnings call.
While rival AT&T continued
to sell more iPhones, Verizon wasn't that far behind. AT&T reported 2.7
million iPhone activations in the third quarter to Verizon's 2 million. Verizon
activated 1.3 million new wireless users, including pre-paid and other
customers, compared to AT&T's 2.1 million. Of the new customers, 882,000
were contract customers, more than double AT&T's 319,000 contract customers
over the same quarter.
iPhone results were lower
than the 2.3 million activations reported in the second quarter because many
customers delayed their upgrade plans to wait for the iPhone 4S, which became
available this month, after the quarter ended.
"We anticipate that the
strong demand we're seeing for the new iPhone 4S will bring even more new
customers," said Francis J. Shammo, CFO of Verizon.
Executives declined to say
how many 4S models it had sold, other than the fact that it had sold out on the
first day and there were back orders for more phones from Apple.
Verizon said 20 percent of
its iPhone customers came from rival carriers, and 80 percent were current
customers upgrading their handsets.
Verizon reported third-quarter
revenues of $27.9 billion, up 5.4 percent from third-quarter 2010 revenues of
$26.5 billion. Analysts had expected revenues of $27.88 billion. Third-quarter
earnings doubled to $1.38 billion, or 49 cents per share, compared with $659
million, or 23 cents per share, in the same period in 2010.
The wireline division, which
includes business and home telephone service as well as the FiOS television and
Internet service, continued to shrink as customers cut the lines in favor of
wireless service. While the division gained 1.3 million customers, operating
revenue was down 1.3 percent from the third quarter of 2010, to $10.1 billion.
The decline was also
affected by Hurricane Irene and the two-week labor strike in August, McAdam
said. The company spent $250 million on "storm-related repair costs,"
according to McAdam. The company is still negotiating with the union, but
executives declined to comment on the state of the discussions.
"We faced significant
challenges in recent months, yet delivered results that keep us on track to
meet our 2011 earnings and revenue guidance, with great momentum expected
entering 2012," McAdam said.
The 4G Long-Term Evolution
wireless network is growing more quickly than anticipated. The 4G LTE network
was available in 165 markets and covered a population of more than 186 million,
the company said. Of the 5.6 million smartphones Verizon sold during the third
quarter, more than half were Android devices, according to Shammo. Verizon also
sold a total of 1.4 million LTE devices, half of which were smartphones and the
rest were "Internet data service," such as mobile hotspot devices and
tablets, he said.
"We are seeing
increasing customer demand for smartphones, tablets and Internet devices that
take advantage of the superior speeds of our LTE network," Shammo said.
About 39 percent of the
devices running on Verizon's wireless network were smartphones, and nearly 95
percent of its product portfolio was 4G capable, Verizon said. The expensive
data plans required for the smartphones helped push average monthly revenue per
contract subscriber up 2.4 percent to $54.89, Shammo said.
Verizon's cloud investments,
such as the Terremark and CloudSwitch acquisitions, are beginning to pay off
for the company. Global enterprise revenues were $3.9 billion, a 2.1 percent
increase year-over-year since the third quarter of 2010. Strategic service
revenues were up 15.6 percent and represent about half of Verizon's global
enterprise revenues. Terremark added about $100 million to revenue this
quarter, according to Shammo.
"We now have a unique
set of capabilities to combine solutions around the network, data center,
security and cloud infrastructure that allowed Terremark to achieve record new
sales bookings in the third quarter," he said.
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