Number-two U.S. phone company Verizon Communications said Monday Q2 profits rose a mild 4.5% from a year ago as new signups of 1.3 million wireless customers trailed those of rival AT&T. EPS were $0.58 ($1.68 billion), up from $0.55 last year but short of the $0.59 analysts expected. Sales climbed 6.3% to $23.3 billion, stronger than the $23 billion analysts were calling for. Verizon continued its industry-leading low churn rates: retail churn was 1.08%, and a company-record 0.85% among post-paid customers. In other sections, Verizon signed up 203,000 new internet users and 167,000 subscribers to its new fiber-optic TV network -- beating estimates of UBS analyst John Hodulik who was calling for 200,000 and 160,000 respectively. "Verizon's strategy of focusing on organic revenue growth and improving margins continues to gain momentum," said Chairman and CEO Ivan Seidenberg. "Results show that we are producing accelerating -- and sustainable -- top- line growth across all key markets." In a June 25 note titled "Investment Controversy, iPhone: Competitor Killer for AT&T, Or Stimulant for the Overall Market?" Cowen & Co. said it expects the iPhone rollout, which is carried exclusively by AT&T, to have only limited impact on Verizon. Separately, Verizon Wireless -- Verizon Communications' joint venture with Vodafone -- said Monday it will buy Rural Cellular Corp. in a deal worth about $2.67 billion ($45/share) including assumed debt. "The addition of Rural Cellular's markets will enable us to expand our services into areas where previously we had little or no presence," Verizon Wireless CEO Lowell McAdam said. Verizon shares are up 0.5% in pre-market trading. Rural Cellular shares are up 35% to $42.70.
Sources: Press release I, II, Bloomberg, Wall Street Journal
Commentary: Verizon Delusional On iPhone Impact • Telecom Meets Web 2.0 - Who Wins?
Stocks/ETFs to watch: VZ, RCCC. Competitors: T, S, Q, DT, CMCSA. ETFs: FDL, IYZ, IXP
Earnings call transcript: Verizon Q1 2007
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