Verizon's third quarter: 1.4 million LTE devices boost wireless unit

Verizon handled a strike and storm outages well as it activated 1.4 million LTE devices to carry the third quarter.
Written by Larry Dignan, Contributor

Verizon reported a strong third quarter and indicated that it was on track to hit its fourth quarter and 2011 goals courtesy of strong wireless and improving enterprise results.

The company reported third quarter earnings of $3.54 billion, or 49 cents a share, on revenue of $27.9 billion. Non-GAAP earnings were 56 cents a share. Wall Street was expecting Verizon to report third quarter non-GAAP earnings of 55 cents a share on revenue of $27.87 billion. The results come a day after AT&T also delivered a solid third quarter. AT&T, however, played up activating 4 million iPhone 4S devices. Verizon barely mentioned the iPhone initially.

Verizon said it was optimistic about the future. In the fourth quarter, the iPhone 4S and a bevy of LTE devices landed. More than half of Verizon's 5.6 million smartphones sold in the third quarter were Android devices. Another 35 percent, or 2 million, were iPhones.

CEO Lowell McAdam said that there was "pent-up" demand for the company's FiOS services and the enterprise business is well positioned because of the acquisitions of CloudSwitch and Terremark.

McAdam added:

We faced significant challenges in recent months, yet delivered results that keep us on track to meet our 2011 earnings and revenue guidance, with great momentum expected entering 2012.

Verizon said it will deliver non-GAAP earnings growth of 5 percent to 8 percent with revenue growth of 4 percent to 8 percent in 2011 relative to 2010.

Verizon CFO Fran Shammo made the following points on the company's earnings conference call:

  • A strike and storm outages shaved 5 cents a share from GAAP earnings. Both factors hampered FiOS installations and some enterprise provisioning.
  • The company secured new agreements for cloud services with companies such as RWE of Germany, Smile Brands and the University of North Carolina.
  • "Our 4G LTE deployment is going very well and we are now providing service in 165 markets covering more than 186 million POPs. With additional markets planned in November and December we are actually ahead of schedule and have already exceeded our year-end target of 185 million POPs."

By the numbers:

  • Verizon's third quarter wireless service revenue was $15 billion, up 6.1 percent from a year ago. Data revenue was up more than 20 percent from a year ago t $6.1 billion. Total wireless revenue was $17.7 billion, up 9 percent from the third quarter a year ago.

  • Wireless operating margins were 29 percent.
  • The company added 1.3 million total connections in the third quarter. That sum includes 882,000 retail postpaid subscribers. Verizon includes tablet additions in that count where AT&T excludes them in its postpaid figure.
  • Total subscribers at the end of the third quarter were 107.7 million. Of that sum, 90.7 million are retail customers. Smartphones account for 39 percent of Verizon's retail postpaid base.
  • Churn in the third quarter was 0.94 percent. Retail churn was 1.2 percent. The company didn't break out iPhone activations in its release.
  • Wireline revenue in the third quarter was $10.1 billion, down 1.3 percent from a year ago.
  • Verizon added 138,000 new FiOS Internet connections and 131,000 FiOS TV connections. Verizon has 4.6 million FiOS Internet ant 4.0 million FiOS TV connections. The company said it has a backlog of installations due to a strike and storms. Verizon projected to add at least 200,000 FiOS Internet and TV customers each in the fourth quarter.

  • Enterprise revenue was $3.9 billion in the quarter, up 2.1 percent from a year ago. Verizon has revamped its enterprise unit to focus more on the cloud. International revenue was up 10 percent from a year ago.

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