Verizon's wireless business shines; 'Comfortable' with FiOS adds

Verizon topped its second quarter targets Monday courtesy of a strong wireless business and executives said demand is holding up despite economic concerns.The telecom giant reported second quarter earnings of 66 cents a share and 67 cents a share excluding integration costs.

Verizon topped its second quarter targets Monday courtesy of a strong wireless business and executives said demand is holding up despite economic concerns.

The telecom giant reported second quarter earnings of 66 cents a share and 67 cents a share excluding integration costs. Wall Street was expecting earnings of 65 cents a share. Revenue was up 3.7 percent from a year ago to $24.1 billion, a tally that was roughly in line with expectations.

Verizon's big story--as is the case with most quarters (statement)--was the company's wireless business, which continues to enjoy decent subscriber growth and low churn. AT&T also had strong wireless results. The takeaway: AT&T and Verizon are taking share from other carriers, but not necessarily each other. In fact, Verizon said it hasn't seen any defections due to AT&T's iPhone launch (despite what you could argue is a weaker phone lineup).

Meanwhile, enterprise demand for Verizon also remained solid. The only worry was FiOS TV additions, which some analysts noted were lower than targets. Verizon said it expects additions to pick up in the third quarter and installation costs to continue to fall.

Denny Strigl, chief operating officer at Verizon, delivered a few interesting tidbits on the company's conference call. Among them:

  • There will be some "convergence" between Verizon Wireless and FiOS. An interesting nugget with no details whatsoever.
  • FiOS launching in New York City (boy is that going to be a long protracted cable war with Time Warner Cable and Cablevision).
  • Enterprise spending has been resilient and there's nothing out of the ordinary. Small business is a weak spot.

By the numbers:

  • Verizon added 1.5 million net customers to end the quarter with 68.7 million customers. Churn was 1.12 percent total and 0.83 percent among retail customers with revenue of $12.1 billion, up 11.8 percent from a year ago. Operating income margin was 28.6 percent, a company best.
  • Wireless service revenue was up 11.6 percent from a year ago to $10.5 billion. Data revenue was up 45.3 percent from a smaller base. Here's a look at the metrics.

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  • The FiOS business was more mixed. Verizon added 176,000 new FiOS TV subscribers for 1.4 million by the end of the quarter. Judging from my mail from Comcast, the competition to recover lost customers to Verizon is intense. Verizon added 187,000 new FiOS Internet customers to end the quarter with 2 million. Consumer broadband and video revenue topped $1 billion, up 52.9 percent from a year ago.

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  • Verizon's broadband fiber-to-the-premises network passed 11 million and 9.6 million premises, respectively.

  • Total broadband connections, which includes flagging DSL accounts, were 8.3 million, a net increase of 54,000 over the first quarter 2008.

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  • Verizon Business had revenue of $5.3 billion in the second quarter, up .9 percent from a year ago. Global enterprise revenue was up 1.7 percent to $4 billion. Revenue from IP, managed services, Ethernet and optical ring services grew at an 18.7 percent clip.

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