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Verizon Communications announced second-quarter earnings that included double-digit earnings growth but, with churn up and the wireline side of the house tempering its wireless success, it still came in shy of Wall Street expectations.
Verizon added 941,000 postpaid customers, bringing its postpaid total to 94.3 million, and announced that its 4G Long Term Evolution (LTE) service now covers 301 million people in 500 markets—or 99 percent of its 3G network footprint.
Revenue for the quarter was $29.8 billion, up 4.3 percent from a year ago, and operating income was $6.6 billion, up 16 percent. It sold 3.8 million smartphones, which are now the phone of choice for 64 percent of its postpaid subscribers.
Verizon CEO Lowell McAdam said the carrier is focused on “continuing to provide the best portfolio of products on the most reliable networks; capturing incremental revenue growth in broadband, video and cloud services; and sustaining our earnings and cash-flow momentum.”
Verizon Wireless’ Share Everything plans have been “very successful,” CFO Fran Shammo said during a July 18 earnings call. The plans have been available for a year now, said Shammo, and 36 percent of wireless accounts are now Share plans.
Shammo also confirmed, in so many words, that Verizon will soon begin following T-Mobile’s lead, offering customers the option of upfront financing for devices and enabling them to upgrade devices more quickly than its two-year contracts currently allow.
As leaked documents suggested days ago, the offering will be called Edge.
“We’ve done a lot of focus groups and market research and found that customers are looking for financing … and we have other customers who want to update their devices [more quickly],” said Shammo.
While he offered few other details, the leaked document—which Shammo didn’t comment on—said that the Edge plan would enable customers to pay a monthly fee, instead of purchasing a device upfront, and allow an upgrade once 50 percent of the device is paid off.
Shammo said the offer would come soon. The leaked doc puts the launch at Aug. 25.
He also confirmed that Verizon is working on a voice-over LTE handset.
“We will start testing and have a handset in the market at the end of this year,” he said. “The critical piece for us is to make sure our VoLTE footprint is [equal to our 4G].”
Shammo explained that VoLTE isn’t backward-compatible, so if a customer steps out of the footprint a call will be dropped, “which is not something customers expect from a premium provider like us.” He added, “It’s critical to us to get it right, right when we launch.”
On the matter of spectrum, Shammo said Verizon will participate in the upcoming auctions but that it’s in “good shape” for the next three to four years and is “not under any spectrum pressure.”
That said, Verizon is “always opportunistic” and buys spectrum whenever it can. “We buy spectrum every quarter,” he added. “You probably just don’t see it.”
As for the rumors that Verizon is eyeing Leap Wireless—the small prepaid carrier that AT&T announced July 16 it has reached a deal to buy—Shammo put those to bed, saying Verizon “isn’t interested in that asset.”
Verizon’s wireline revenues increased 4.7 percent over a year ago, while FiOS revenues grew nearly 15 percent during the quarter. Wireless postpaid churn—the customers who left Verizon—was 0.93 percent, compared with the 0.84 percent of a year ago and the 0.90 percent that analysts anticipated, according to Reuters.
Shammo, emphasizing that Verizon will continue to focus on delivering strong customer service and the best wireless network, as well as on being “disciplined,” a word he used several times during call, added, “We obviously know we have more work to do.”
AT&T will announce its second-quarter results July 23, and Sprint will follow July 30.