Verizon Posts Higher Profit, Sees Uncertainty with USF Revamp, Continues Contract Talk

The carrier netted 882,000 new postpaid customers during the quarter versus the 584,000 in the year-ago quarter. But net postpaid additions slowed down sequentially as the company added 1.3 million customers in Q2. Verizon had 107.7 million customers at the end of the quarter, up 6.5 percent year-over-year. Postpaid churn was 0.94 percent, a slight improvement from the year-ago period. The carrier added two million iPhones in the quarter, bringing its year to date count for iPhone sales to some 6.5 million. Verizon ran out of the iPhone 4S in stores on the first day it was launched, Shammo said.

Verizon supports completing the USF overhaul, promoting broadband and moving from voice to broadband subsidy, Shammo said. The regulatory changes that the FCC is contemplating might not be exactly what the industry wants, but they're a step in right direction, he said. Verizon, a net payer, would see some benefit as a result of the overhaul but there would be “some puts and takes within our portfolio,” he said. Verizon’s wireless and business operation could see some benefit, he said. But the company will have a better understanding of the impact after it sees more details of the proposed changes, he said. Regarding the impact of Sprint Nextel’s plan to get rid of some roaming expense via network upgrade, Shammo said it’s not a near-term issue and Verizon’s revenue from Sprint is not material at all. There has to be a lot of execution in order for the roaming expense reduction plan to happen, he said.

While Verizon’s contract negotiation with its wireline workers is ongoing, the company’s union workers decided to march with Occupy Wall Street at Verizon’s headquarters in New York. The Communications Workers of America cited the company’s attempts to eliminate pensions, cut benefits and eliminate job security and change healthcare arrangements. Verizon understands the Occupy Wall Street group has concerns and frustrations about the economy, but calling out Verizon on these issues is “misguided,” a spokesman said. When a final labor contract is reached with the wireline workers, Verizon will still offer competitive wage and benefit packages, he said. “We hope the Occupy group stays clear of the union’s labor campaign that is only trying to spread inaccurate, disparaging and misleading information,” he said.

On LTE expansion, Verizon now has LTE in 165 markets, covering 186 million POPs. The company plans to have 175 markets covered by Nov. 17, have two-thirds of the country covered with LTE by mid-2012, and finish covering its 3G footprint with LTE by the end of 2013, Shammo said. Verizon sold 1.4 million LTE devices in the quarter, up from 1.2 million in Q2. Of its 1.4 million LTE devices in the quarter, Shammo said just over half of them were smartphones and the rest were data-only devices.

Following the ongoing industry trend of declining voice connections, Verizon’s total voice connections, including FiOS digital voice and traditional voice lines, decreased 7.6 percent year-over-year to 24.5 million. However, broadband service continued to grow. The operator had 8.6 million broadband customers by the end of the quarter, up 2.8 percent year-over-year, helped by growth in FiOS broadband subscriber gains. FiOS TV was another bright spot with 131,000 net new FiOS TV connections, growing its total FiOS TV connections to 4 million by the end of the quarter. The operator expects to add even more TV customers in Q4 after it’s done with installation backlogs caused by recent hurricanes and a strike.