Verizon Quarterly Results Show Double-Digit Growth, 4G LTE Focus
Verizon Wireless saw double-digit earnings growth during a third quarter that was helped by sales of 6.8 million smartphones, 3.1 million of which were iPhones from Apple.
The nation's largest carrier also added 1.5 million retail postpaid subscribers, surpassing Wall Street estimates and leading it toward revenue of $19 billion, which was up more than 7 percent year-over-year.
Verizon released its third-quarter 2012 financial results Oct. 18.
"With our 4G LTE network advantage, well-received Share Everything Plans and unmatched product portfolio, Verizon Wireless continues to do an outstanding job of balancing growth and profitability," CEO Lowell McAdams said in an Oct. 18 statement.
"Wireless achieved record profitability in a quarter in which we reported the highest number of retail postpaid gross and net adds in four years,” McAdams added.
The entire wireless market is today focused on spectrum and the rollout of 4G Long Term Evolution (LTE) networks, and Verizon executives repeated—as the carrier says in its commercials—that Verizon's LTE network is larger than those of all its competitors combined. It now covers 419 markets and 250 million people.
During the quarter, Verizon began selling seven additional LTE-enabled smartphones—including the iPhone 5—which helped to drive smartphone use on the network to 53 percent, up 50 percent from the end of the second quarter.
Of the iPhones it sold during the quarter, CFO Fran Shammo said the majority were iPhone 4 and 4S handsets. "We had supply constraints," he said of the iPhone 5 but added that the lowered prices of the older handsets were an allure.
"With the iPhone 4 and 4S, we had customers come to the network who previously didn't come because of the cost," Shammo explained.
The quarter was also the first under Verizon's Share Everything plans, which connect a contract to a data allotment instead of to individual devices.
"Overall what we're seeing in Share Everything is better than expected," said Shammo. He added that customers are attaching a lot more Internet WiFi devices, and particularly MiFi hotspots, which they can attach for $20 and then use to get several tablets and other devices online.
"From tablets we're seeing some of that, but not as much as expected," said Shammo.
Technology Business Research analyst Eric Costa, in an Oct. 18 report, noted that the quarter was the most profitable quarter for EBITDA (earnings before interest, taxes depreciation and amortization) margin in Verizon's history and was "backed by smartphone sales and the initial success of the Share Everything plans," which accounted for 13 percent of Verizon's net additions during the quarter.
"The plans will result in increased connected device adoption and increased data consumption as higher data tiers are adopted," added Costa.
Verizon sits atop an industry that has seen major changes playing out in recent weeks, as competitors look to put less space between themselves and Verizon. Sprint this week sold a 70 percent share of its company to Japan-based Softbank, for an influx of $20.1 billion, $8 billion of which will go toward its LTE efforts. Days before, No. 4 carrier T-Mobile and No. 5 carrier MetroPCS announced they were teaming up. In both deals, value and unlimited data will be a focus, whereas Verizon tends to emphasize robustness and plenty—the more devices, the merrier.
Shammo said he expected "consolidation" in the industry, and that it's a good thing.
"I think our network and competitive advantage speaks for itself—we're competing in that arena today already, as far as unlimited plans."
Shammo added, "It's going to be difficult for others to do that .... but [consolidation] is good for the industry. There's a lot of opportunity out there."