Verizon delivers solid second quarter; Outpaces AT&T on wireless postpaid adds

In a quarter with multiple moving parts, Verizon Communications reported better-than-expected earnings and added 665,000 retail postpaid wireless customers.
Written by Larry Dignan, Contributor

Updated: In a quarter with multiple moving parts, Verizon Communications reported better-than-expected earnings and added 665,000 retail postpaid wireless customers.

That post-paid figure is notable since AT&T added 496,000 in the second quarter to miss some Wall Street estimates. Verizon's postpaid wireless additions topped estimates. For instance, Barclays Capital expected Verizon to add 550,000 retail postpaid wireless subscribers.

Another key point: AT&T added more mobile device connections such as e-readers and GPS systems. Overall, Verizon has 7.7 million machine-to-machine connections and AT&T has 6.7 million.

Also: AT&T's iPhone dividend pays off, but subscriber adds disappoint

Verizon's quarter had multiple items. Overall, the company reported a net loss of 7 cents a share for the second quarter. But that includes $2.3 billion in costs to cut workers. Verizon is offering voluntary separations to 11,000 workers. Meanwhile, Verizon spun off its wireline assets to Frontier on July 1. Adjusting for divestments and workforce cuts, Verizon reported earnings of 58 cents a share, three cents ahead of Wall Street estimates. Second quarter revenue of $26.77 billion, up 3.4 percent from a year ago, was lighter than estimates of $27.1 billion, but it's unclear whether analysts accounted for the various moving parts in Verizon's report.

Verizon took a 52 cents a share charge for voluntary separations related to union employees; a 6 cents a share charge for Alltel merger integration costs and divesting certain properties; 4 cents a share for the Frontier spin-off and 3 cents a share to defer wireless data revenue for future quarters.

On a conference call with analysts, Verizon CFO John Killian said:

  • The company is looking at tiered pricing models, like the ones deployed by AT&T, and promised more on that in the future. Verizon is "monitoring the situation," but isn't in a rush to make any drastic moves.
  • LTE remains on schedule.
  • Verizon has supply of Droids, but there are delays in fulfillment.
  • Verizon is pleased with its smartphone lineup into the second half of the year.

In a statement, Verizon CEO Ivan Seidenberg said that the company has cut costs and revamped the company to focus on next-generation connectivity. He said:

"We have the network platforms in place, and the product and service innovations in the pipeline, to fuel the next generation of growth in our changing industry.  Our cost-reduction efforts are gaining momentum, and trends in the global business market are showing signs of stabilization."

In addition, Verizon said it plans to launch LTE service by the end of the year in 25 to 30 markets. By the end of 2013, Verizon said its entire 3G footprint will be 4G.

By the numbers:

  • Verizon added 1.4 million net wireless customers in the second quarter. That sum includes 665,000 retail postpaid subscribers.
  • Retail postpaid churn was 0.94 percent in the quarter. Retail churn was 1.33 percent and total churn was 1.27 percent.
  • Verizon ended the second quarter with 86.2 million retail customers and 92.1 million total.
  • Wireless data revenue was $4.7 billion, up 23.4 percent from a year ago.

  • The company added 196,000 net FiOS Internet subscribers and 174,000 for FiOS TV.
  • Verizon had 9.3 million broadband connections at the end of the quarter, up 2.5 percent from a year ago.

  • Like AT&T, Verizon saw improvement in its enterprise business, which saw revenue rise 0.6 percent from a year ago.
  • Capital expenses were $4.2 billion in the second quarter, down 3.6 percent from a year ago. Verizon said 2010 capital spending will be $16.8 billion to $17.2 billion, consistent with the company's previous outlook.

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