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Verizon 3Q profit rises, bolstered by wireless
Question of the Day
NEW YORK (AP) - Verizon’s Share Everything plan looks like it’s good for the company’s shares, too.
The parent of the nations’ largest cellphone company on Thursday reported a blow-out number of new devices on its network, boosted by the revolutionary plan, introduced four months ago. The plan made it cheaper for households to add wireless service to non-phone devices like tablets and laptops.
Verizon Wireless added a net 1.5 million devices to contract-based plans in the third quarter, more than it has in many years. Analysts were expecting it to add about 900,000. Including non-contract devices, overall additions were the strongest in four years.
Verizon said 13 percent of its customers with contract-based plans were already on Share Everything, signaling that the plan has caught on, helped by aggressive advertising.
The average household with a contract-based plan paid $145.42 per month in the quarter for wireless service, up 6.5 percent from a year ago.
The end of the quarter saw the launch of the iPhone 5, which also helped Verizon’s numbers. It activated 650,000 of the new model in just over a week, according to Chief Financial Officer Fran Shammo. It activated 3.1 million iPhones of all kinds in the quarter, accounting for 46 percent of its total smartphone activations.
Verizon ended the quarter with a billing relationship for 96 million wireless devices on its network, plus and undisclosed number through wholesale relationships. No. 2 AT&T had 77 million direct-billed wireless devices at the end of June.
The launch of an iPhone usually brings down Verizon’s earnings in a quarter, because it has to pay Apple about $600 per phone it sells for $199. It makes the money back over the course of a two-year contract. But the iPhone 5 launched so late in the quarter that it failed to weigh seriously on Verizon’s profits. Its operating profit margin in wireless was 31.8 percent, the highest in years.
However, not all of the wireless profits flow to parent company Verizon Communications, which only owns 55 percent of Verizon Wireless. The rest of the wireless division is owned by Vodafone Group PLC of Britain, which gets a corresponding share of the profits.
For the three months ended Sept. 30, New York-based Verizon Communications reported earnings of $1.59 billion, or 56 cents per share. That’s up from $1.38 billion, or 49 cents per share, a year ago.
Removing 8 cents per share in charges related to patent lawsuit settlements, earnings were 64 cents per share. That matched analysts’ expectations.
Revenue increased 4 percent to $29.01 billion from $27.91 billion. That also matched analysts’ expectations.
Verizon’s stock added 53 cents, or 1.2 percent, to $45.25 in premarket trading.
The company also said it’s still on pace to meet its 2012 financial goals.
On the wireline side, revenue continued to shrink, and Verizon posted the first decline in overall broadband customers in four years, as it stopped marketing DSL connections to customers who don’t also buy phone service. DSL connections are slower than cable modems, and Verizon has stopped investing in the technology, focusing instead on fiber-optic FiOS connections available in about two-thirds of its local-phone territory.
Verizon’s report marks the debut for telecommunications companies this earnings season. Rival AT&T Inc. reports on Wednesday.
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