AT&T Beats Verizon Wireless in Subscriber Adds Despite Higher Churn
Good results on new subscribers and churn weren’t enough to keep second-place Verizon Wireless from falling further behind U.S. cellular leader in AT&T in total customers third quarter. Parent Verizon posted $23.8 billion in third quarter revenue, up 5.8 percent from last year. FiOS growth is spurring a wireline turnaround, executives said Monday in a call with analysts. They raised their projections on share buybacks and the benefits of the MCI acquisition. But they brushed aside questions on 700 MHz auction strategy.
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Verizon Wireless added 1.6 million net subscribers, 14 percent fewer than last year, increasing its subscriber base to 63.7 million. Last week, AT&T reported 2 million net adds, on the strength of Apple’s iPhone, and a base of 65.7 million. But Verizon Wireless maintained its churn lead among wireless carriers, at 1.27 percent, 0.03 points higher than a year earlier. AT&T was second best at 1.7 percent for the quarter.
Growth in data revenue and total revenue per user raised Q3 income. Verizon Wireless had $11.3 billion revenue, up 14.4 percent from a year earlier and $978 million in profits, up 21.6 percent. Data contributed $2 billion to revenue, up 63.4 percent. Retail revenue per user rose 1.9 percent to $52.17. Data revenue per user shot up 42.9 percent to $10.59.
AT&T’s iPhone had “minimal impact,” said Chief Operating Officer Dennis Strigl. Apple’s iPhone price disrupted Verizon Wireless business for two to three weeks, as when the maker introduced the iPhone second quarter, he said. Verizon isn’t worried about the iPhone dominating consumer’s holiday wish lists, Strigl added. Verizon has a “close competitive offer to iPhone” in LG Electronics’ touch-screen Voyager, he said. The Blackberry Pearl, Samsung Juke and other soon-to- be-debut devices also should keep this season’s Verizon sales high, said Chief Financial Officer Doreen Toben. Getting the new toys boosted Verizon wireless operating expenses 13.1 percent to $8.24 billion, and Verizon expects high handset costs to persist in the fourth quarter, Strigl said.
Strong adds in FiOS slowed wireline line loss and revenue decline, Verizon said. Verizon posted $12.7 billion revenue after adding 202,000 net FiOS TV customers and 229,000 net FiOS Internet subscribers, it said. Verizon saw a 4.5 percent improvement in line loss from last year, mostly thanks to FiOS, Toben said. Verizon made access line gains in Rhode Island FiOS TV markets that without FiOS six months ago were losing lines at a rate exceeding 10 percent annually, she said. Meanwhile, FiOS Internet additions drove total Verizon broadband subscriptions up 21 percent from a year earlier, Strigl said. Wireline revenue was down 0.8 percent, but the figure reflected Verizon’s sixth straight quarter of reduced decline. FiOS is on target to contribute a profit in 2008, and Verizon is “going about as fast as we think we can” to deploy fiber, the executives said.
Verizon increased 2007 MCI synergy predictions to $900 million from $825 million. This quarter Verizon saw $300 million in benefits from the merger, Strigl said. MCI- Verizon integration should be finished in a year, Toben said. The Bell raised the 2007 target for its share repurchase program to $2.5 billion from $2 billion after buying back $800 million shares third quarter and $1.7 billion so far this year.
Strigl declined to answer analyst questions on a meeting with Google, possibly concerning the coming 700 MHz auction. Verizon meets with “lots of companies and people all of the time,” Strigl said.