Verizon's third quarter on target; iPhone dings wireless churn

Updated: Verizon's third quarter results were in line with Wall Street estimates courtesy of a solid performance in the telecom giant's wireless business. But wireless churn was up as the company did take a hit due to the popularity of the iPhone.

On a conference call with analysts, Verizon chief operating officer Dennis Strigl was asked about the wireless unit's 1.33 percent total churn rate (1.03 percent post-paid) in the third quarter. That tally was up from a year ago and sequentially.

Strigl said Verizon Wireless' churn rate remains low, but did note a seasonal uptick and the impact of the iPhone. "I'm not concerned about year over year churn. We did see some churn to the iPhone from the quarter," acknowledged Strigl.

Strigl did note that Verizon Wireless has a "broadbased portfolio" and the company isn't "wedded to any one iconic device."

Here's a look at the churn figures:

Relative to AT&T Strigl has a point. But AT&T is looking to the iPhone to improve its churn rates and will subsidize Apple's device to hit its goal. Thus far, AT&T's churn still lags Verizon's. AT&T's total monthly subscriber churn in the third quarter was 1.7 percent, flat a year ago. Postpaid churn was 1.2 percent, down from 1.3 percent in the third quarter of 2007.

Although the iPhone remarks are notable most of Verizon's conference call was about gauging the economy's impact on the company. Strigl said it wasn't seeing any recession signs judging from its businesses, but it did not there may be pricing pressure ahead.

The company on Monday reported third quarter earnings of $1.67 billion, or 59 cents a share, on revenue of $24.8 billion, up 4 percent from a year ago. Excluding charges, Verizon reported earnings of 66 cents a share to match Wall Street estimates.

Consistent with recent quarters, Verizon was fueled by its wireless business. Verizon added 1.5 million organic customers and 2.1 million if you include the Rural Cellular acquisition. Verizon Wireless had 70.8 million customers with 68.8 million retail customers, up 11.3 percent from a year ago (statement).

Also see: iPhone 3G: Was it really such a great deal for AT&T?

Verizon added 233,000 and 225,000 new FiOS TV and Internet subscribers, respectively.

By the numbers:

• Verizon Wireless reported operating income of $3.46 billion on revenue of $12.7 billion, up 12.5 percent from a year ago. Operating margins were 27.3 percent, up from 27.1 percent from a year ago.

• Verizon ended the quarter with 1.6 million FiOS TV customers, up from 700,000 a year ago. The company has 2.2 million FiOS Internet customers. But wireline revenue was $12.2 billion, down 1.7 percent from a year ago.

• Verizon Business had revenue of $5.4 billion, up 1.2 percent from a year ago. Revenue from Internet protocol, managed services and Ethernet and optical ring services was $1.6 billion, up 15.4 percent from a year ago.
• Sixty percent of Verizon's Wireless customers had 3G devices. Verizon didn't give an exact date to launch the Blackberry Storm.