UPDATE: Verizon 1Q Net Up on Wireless Growth
Published on: 27th Apr 2008
Note -- this news article is more than a year old.
NEW YORK (Dow Jones) Verizon Communications's profit climbed 9.8% as the telecommunications carrier took the lion's share of the industry's best wireless customers.
Verizon Monday reported net income of $1.64 billion, or 57 cents a share, for the first quarter, compared with $1.5 billion, or 51 cents a share, a year earlier. Revenue rose 5.5% to $23.83 billion.
As with rival AT&T, Verizon's results suggest that the industry is largely shrugging off the effects of a slowing economy.
"We're really not seeing a change in trends," Chief Financial Officer Doreen Toben said in an interview. "How many people are really going to drop their wireless phone?"
In March, Ms. Toben reassured Wall Street that the telecom giant was on track to duplicate its solid performance from last year, but hinted that an economic slowdown was making a small dent in its wireless business. In the past several months, telecom operators signaled to varying degrees that they were being affected by broader economic problems as consumers pulled back on spending. Cable operators and satellite operators have also blamed lackluster results partly on the souring economy.
(This story and related background material will be available on The Wall Street Journal Web site, WSJ.com.)
In focus has been the rate of customers who have canceled their services because they could no longer afford to pay their bills. Ms. Toben said during a conference call Monday the rate in the landline side had improved, while the wireless side had stabilized.
Like AT&T, which has posted more rapid profit growth than Verizon in the last two quarters, wireless business drove Verizon's total results. Revenue rose 13% at Verizon Wireless, a joint venture with Vodafone Group. The turnover rate rose to 1.18% from 1.08% a year earlier. Average monthly revenue per customer rose 1.3%.
New-subscriber growth dipped 12% to 1.5 million, putting total subscribership at 67.2 million. More importantly, 1.3 million of the new customers signed long-term contracts, or nearly twice as many as AT&T had in the first quarter.
The $99 unlimited calling plans, which all of the carriers unveiled in February, was driving growth in high-end consumers and was accretive to results, said Dennis Strigl, chief operating officer of Verizon.
The wireless unit's performance is compensating for the deteriorating landline business. Its total base of phone lines fell 8.2%, while wireline revenue lost 1.4%.
"Wireline is losing the battle, but wireless is winning the war," said Craig Moffett, an analyst at Sanford Bernstein & Co.
Broadband connections stood at 8.5 million as of March 31, up 15%. Sales of wireless and Internet services have helped phone companies like Verizon and AT&T ease the impact of declining sales of fixed lines.
Verizon added 263,000 FiOS TV customers, taking the total to 1.2 million on March 31. Verizon is using FiOS as its weapon to fight back cable-television operators, which also offer the all-in-one packages of video, phone and Internet services.
Shares of Verizon recently traded up 2.4% to $37.93.
-By Roger Cheng, Dow Jones Newswires; 201-938-2020; firstname.lastname@example.org
-Andrew LaVallee of The Wall Street Journal and Mike Barris contributed to this article.
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