Wireless boosts Verizon’s Q1 results; iPhone still up in air

Mon, 04/27/2009 - 8:30am
Mike Robuck

Verizon Communications was able to beat back some of the economic doldrums due to its acquisition of Alltel and the addition of new wireless customers in its first quarter.

Verizon posted a 12 percent increase in revenue for the first quarter, which was boosted by the 1.3 million net new cell phone users, which didn’t include Alltel’s customer base. According to Reuters, a poll of analysts expected Verizon to add 1.2 million new wireless subscribers in the first quarter.

“We’re quite pleased with the wireless net adds for the quarter,” Verizon President and COO Dennis Strigl said in this morning’s conference call. “Fifty-seven percent of Verizon’s total revenue comes from wireless services. We’re weathering the effects of the economy very well.”

Verizon’s profit increased to $1.65 billion, or 58 cents per share, from $1.64 billion, or 57 cents per share, a year ago. Excluding one-time items, Verizon’s earnings went from 61 cents per share to 63 cents per share, while analysts had forecast 57 cents per share.

The company’s revenue increased 11.6 percent to $26.59 billion.

There were several reoccurring themes during this morning’s conference call, one of which was Alltel, which Verizon bought in January. Executive vice president and chief financial officer John Killian said the addition of the Alltel subscribers to Verizon would continue to drive growth in the wireless sector.

Killian said Verizon expects to realize $1 billion in expense savings by next year once the integration with Alltel is finished. Over the next few months, Verizon Wireless, which is jointly owned by Verizon and Vodafone Group, will work on getting Alltel customers onto its billing platform. Killian said Verizon Wireless will focus on driving Alltel’s RPU (revenue per user) up, which is currently $4 below Verizon’s.

Strigl and Killian also talked about the build-out of Verizon’s Long Term Evolution (LTE) network, which Strigl said should be in several commercial markets before the year is out, and in 25 to 30 markets next year.

Verizon’s LTE network has also created speculation that Apple may offer its iPhone to Verizon subscribers sometime next year. A story in today’s USA Today (available here) said Apple and Verizon are in discussions over Apple breaking its exclusive agreement with AT&T in order to offer its iPhone to Verizon Wireless’ 84.1 million retail subscribers, although those customers would need to be on Verizon’s LTE network and not its current CDMA network.

“We have said in the past that we’re always open to discussion with any supplier,” Strigl said when asked about the iPhone talks. “We have no announcement to make relative to Apple today, but let me say we haven’t historically been dependant on any one device.

“We believe we have a strong handset lineup, and you’ll see more from us as the year goes on. Smartphone and PDA sales overall in the quarter were very, very strong.”

Not counting the Alltel subscribers, Strigl said Verizon had 19.3 million devices integrated on its network, which was double what it had last year. With Verizon’s Open Development Initiative, Verizon expects to see more devices and applications for its 4G network.

Killian said Verizon’s triple-play bundle helped it weather the current economic downturn. Verizon added 299,000 FiOS TV customers in the first quarter for a total of 2.2 million subscribers.

On the data side, Verizon added 298,000 FiOS Internet subscribers for a total of 2.8 million customers. Strigl said data customer churn was up over last year because of the economy. One example was the drop in broadband access cards due to companies laying off employees.

Verizon currently is in front of 40 percent of the households in its FiOS footprint; Strigl said that will increase to 60 percent by year’s end.

Verizon’s global enterprise revenue was down 3.4 percent.

More Broadband Direct 04/27/09:
•  Wireless boosts Verizon's Q1 results; iPhone still up in air
•  USDA OKs CommScope's FTTH system
•  WildBlue significantly increases broadband speeds
•  Limelight's motion for judgment granted
•  Level 3, IPtimize formalize relationship
•  Report: NEC Electronics, Renesas near merger
•  Broadband Briefs for 04/27/09



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