Verizon revenues top estimates on wireless surge

Tue Jul 22, 2014 10:44pm IST

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(Reuters) - Verizon Communications Inc, the largest U.S. wireless telecommunications company, on Tuesday reported better-than-expected quarterly revenue on a jump in wireless customers and a surge in tablet sales.

The increase in customers is a boost for Verizon, which has been reluctant to follow rivals like T-Mobile US Inc which have discounted aggressively.

Profit in the second quarter also topped Wall Street estimates.

Net additions of wireless subscribers with contracts surged 53 percent to 1.4 million in the second quarter ended June 30. That included a record 1.15 million in tablet sales.

Wireless companies have been weaning customers from plans that subsidize equipment financing over two years, and offering plans that separate service charges from equipment purchases.

Verizon has not been aggressively promoting such plans, and said only 18 percent of wireless customers signed up for them.

"We want our customers to have choice. We did not abandon the legacy model when we launched our installment plan as other carriers have," said Fran Shammo, Verizon's chief financial officer.

Two-year pricing plans have long served as a natural buffer against customer switching, according to Craig Moffett, chief analyst at MoffettNathanson.

"Verizon has maintained all along that the industry shouldn't be so quick to abandon a strategy that has served it awfully well for last decade," said Moffett.

“The risk is that the other carriers will continue to test lower and lower prices until the market finds a new equilibrium and that Verizon will be increasingly isolated at the high end of the market,” he added.

The company has focused on retaining customers who bring more monthly revenue and switching them to products such as smartphones and tablets that generate more profit.

Despite its premium prices, the company has been able to reduce customer defections, with an average rate of 1.25 percent compared with 1.37 percent last quarter.

Verizon's wireline revenue rose for the first time in seven years due to increased adoption of its FiOS internet and television products, as well as the migration of customers from older copper lines, to better performing fiber.

The company said it added 100,000 FiOS video customers and 139,000 net new FiOS Internet connections in the quarter.

Verizon shares edged up 0.3 percent at $50.85. The stock has risen about 3 percent so far this year, underperforming the S&P 500, which is up 7.4 percent.

Excluding items, the company earned 91 cents per share in the quarter.

Analysts, on average, expected a profit of 90 cents per share on revenue of $31.12 billion, according to Thomson Reuters I/B/E/S.

Verizon's wireless revenue, which accounts for more than two-third of total revenue, rose 7.5 percent due to strong growth in service revenue.

Average monthly revenue per account rose 4.7 percent to $159.73.

(Reporting by Marina Lopes in Washington; Additional reporting by Soham Chatterjee in Bangalore; Editing by Kirti Pandey and Jeffrey Benkoe)

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