Verizon Wireless' Q2 shows company in wait-and-see mode
Published: 28 July, 2009
READ MORE: Financial | Verizon
Verizon Wireless posted a solid if unexciting second quarter, despite being outshone in customer acquisitions by AT&T, armed with its iPhone. Despite this, the carrier was keeping quiet on its possible plans with Apple, though it did say it would launch the Palm Pre, talked about its app store plans, and followed AT&T in offering expanded Wi-Fi options to converged customers. This is a period of wait-and-see for Verizon, as it prepares various key activities, such as LTE and open software, to boost the wireless joint venture - increasingly important for offsetting the squeeze on wireline telephony and business spending.
Verizon Wireless, a 55:45 joint venture with Vodafone, turned in $15.5bn in revenue, up 27.7% year-on-year, while service revenues were up by a similar percentage to $13.3bn. Data revenue was growing far faster than the overall wireless division, up 52.6% to reach $3.9bn or 25% of the total. Verizon Communications posted revenue up 11.3% to $26.9bn, boosted by the Alltel acquisition, by organic wireless growth, and by strength in Fios broadband and video services, but squeezed by lower telephony and enterprise spending. Earnings were down 21% year-on-year for the group.
At Verizon Wireless, the cellco added 1.1m net subscribers to record a base of 87.7m with churn of 1.37%, improved from 1.47% in Q1 but up by 22% on the year-earlier figure of 1.12%. Most of the increased churn was among business users impacted by the economic downturn, said COO Denny Strigl. Total ARPU was $51.10, down 0.8% year-on-year but up from $50.74 in Q109, and data ARPU was $14.96, up 19% on last year and also up on Q1, when the figure was $14.16.
Strigl talked about some upcoming devices, including the BlackBerry 'Storm 2' plus Motorola's 'Calgary' Android product and the Palm Pre (once Sprint's exclusive ends early next year). He was silent on the various Apple rumors - that there could be a CDMA iPhone or an Apple tablet for Verizon by year end. Some analysts got really carried away and predicted an LTE iPhone for 2010, despite Qualcomm's recent indications that chip timescales meant handsets would not be possible until at least 2011.
Taking a more realistic view on LTE, CFO John Killian said initial LTE pricing plans will be based on Verizon's broadband access offerings (reinforcing the idea of a fixed CPE deployment first). He said it is "still early days" and that initial trials are planned later this year in Boston and Seattle, with plans to deploy to 30 markets covering 100m subs next year. "The other thing with LTE is there are a range of applications, machine-to-machine kinds of things, so pricing structures for that will evolve as we go through the next 12 months," he said.
Finally, Verizon Communications is softening its attitude to Wi-Fi, where it has lagged behind AT&T and wireless-only T-Mobile USA. It followed in its arch-rival's footsteps, offering free access to hotspots for Fios and DSL internet subscribers, via a partnership with hotspot aggregator Boingo Wireless, and this could also be included in future bundles with mobile contracts too.
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