Verizon Preps Fourth Quarter Device Barrage, Droid Will 'Stimulate Demand'

Verizon (VZ) delivered a solid third quarter courtesy of its wireless business, which added 1.2 million net customers excluding acquisitions. The company also said it is set up for the fourth quarter with the launch of Research in Motion’s (RIMM) Storm 2 on Wednesday, two Motorola (MOT) Android devices and 12 other handsets.

However, AT&T (T) added customers at a faster pace in the third quarter on the strength of the iPhone. Verizon is hoping to change that equation via a partnership with Google (GOOG). John Killian, CFO of Verizon, characterized the company’s wireless performance as strong and said there “are plenty of revenue growth opportunities” ahead. It’s clear Verizon is betting big on Android.

“We think our new device lineup will stimulate demand,” said Killian, on a conference call with analysts. Killian said that the Storm 2 will be available Wednesday and the Droid device “will be groundbreaking.”

Verizon on Monday reported third quarter net income of $2.88 billion, or 41 cents a share, on revenue of $27.3 billion, up 10 percent from a year ago. Non-GAAP earnings were 60 cents a share, a penny better than Wall Street estimates (statement, quarterly presentation).

As usual, the quarter was all about the wireless business. By the numbers:

• Verizon ended the quarter with 89 million wireless customers, up 25.7 percent courtesy of acquisitions—notably Alltel.
• The company had a post-paid churn of 1.13 percent. AT&T had 1.17 percent.
• Cash expense per customer was $27.52 in the third quarter, down from $28.52 a year ago.
• Data revenue was 30.5 percent of wireless service revenue.
• Wireless revenue was $15.8 billion, up 24.4 percent from a year ago and 4.9 percent excluding acquisitions.
• $5.1 billion in wireless capital expenses year to date.
• The company said its integration of Alltel (AT) was on track. All Alltel customers have been converted to Verizon’s billing system.

Verizon also posted solid results for its FiOS efforts. The company added 198,000 net FiOS Internet customers for a total of 3.3 million. Verizon said it added 191,000 new FiOS TV customers.

Killian noted that FiOS additions were off the pace of the last two quarters. He added that Verizon eased off the promotional activity. On the capital spending front, Killian said that the FiOS buildout will be complete by the end of 2010 and that fact will free up capital for 2011.

Verizon, which reorganized its wireline business into one unit that combines FiOS, legacy services and the enterprise business, said that corporate sales remain muted.

Killian said he wasn’t seeing any “meaningful improvement” in the enterprise business, but did add that CIOs were becoming interested in managed services and select capital investments.

Comments

[Aryamehr:]

Sprint already has a 4G platform and it is growing really fast. Verizon won't have their 4G available for another year at best and ATT will have to rely on its lagging 3G network, behind Sprint and VZ, hoping the iPhone can carry them through another year, regardless of their poor 3G coverage. What ATT should fear is that Sprint and VZ are both getting a line-up of phones that will revolutionize the Smartphone world. At the end of this quarter Sprint will have IMHO a line-up of phones that will without doubt level the playing field. Sprint will also have enough 4G coverage
to give it leverage over ATT and VZ, when it comes to speed and dependability. Add this to their Smartphone plans and what you have is a formidable competitor.

Oct 26 12:06 PM