Wireless data is Verizon's key driver, as FiOS fades

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Wireless data is Verizon's key driver, as FiOS fades

By CAROLINE GABRIEL

Published: 27 January, 2010

READ MORE: Financial | US | Verizon | Fixed-line

Whether or not Verizon Wireless gets an Apple iPhone or iSlate today, wireless performance is the carrier's main driver, and was strong in the fourth quarter of 2009. This did not save Verizon Communications, the cellco's larger parent, from diving into a Q4 loss, mainly because of restructuring charges, amid a slowdown in the wireline business, including the FiOS fast broadband/IPTV offering.

Wall Street was particularly disappointed by the low number of new FiOS subscribers - growth fell by 50% year-on-year - and CEO Ivan Seidenberg commented in his statement: "The economy won't help us as much as we thought", warning that there would be no significant improvement until the end of this year. As a result, the company will axe another 13,000 jobs in 2010, about the same number culled in each of the past two years.

Overall, the carrier reported a loss of $653m, or 23 cents a share, compared with a year-ago profit of $1.23bn, or 43 cents. Excluding one-time items, mainly job reduction charges, earnings fell to 54 cents a share. Revenue was up 9.9% to $27.09bn. Both figures disappointed analysts.

The wireless business was the star of the show however, and boosted by a long overdue refresh of Verizon's smartphone line-up, with the introduction of high profile Android phones like Motorola Droid and HTC Droid Eris. The Verizon Wireless joint venture with Vodafone saw revenue rise 22.5% to $15.73bn. The main factor was a shift towards higher end smartphones with heftier data plans.

However, although Verizon Wireless has largely steered clear of the competitive bloodbath in the low end and prepaid markets, it did see some of its growth coming from this area nonetheless, crediting its expanded MVNO deal with Tracfone Wireless for some of its resilience in Q4. Tracfone sells a low cost mobile service via retail giant WalMart.

Wireline revenue was down 3.9% to $11.5bn. "Today's results were eye opening, if only because of the magnitude of the divergence," Craig Moffett, an analyst at Sanford Bernstein, told the Reuters news agency. "Wireline results were at least as weak as wireless was strong."

Verizon's increasing dependence on its wireless JV, especially with a rocky year ahead for FiOS, may reignite attempts to gain full control of Verizon Wireless from Vodafone.

In terms of mobile customers, Verizon added 2.2m net subscribers in the quarter, 1.2m of them postpaid and 1m wholesale. It ended the year with 91.2m mobile users. Total wireless service revenues were flat compared to Q3, at $13.5bn, and up only 5% year-on-year, reflecting pricing pressure in voice. By contrast, data revenues continued to soar, increasing by $200m over Q3 to $4.3bn and 26.6% year-on-year. Data now accounts for 31.9% of all service revenues, with half of that figure coming from advanced options such as web access and email, rather than messaging. This is driven by increased uptake of smartphones, which are now 15% of total subscribers, and what Verizon calls '3G multimedia handsets and devices' (high end featurephones with full browsers and usually keyboards, but no open OS). These now account for 11% of total subscribers. Data ARPU reached $16, up 18% year-on-year, and should climb further after the carrier introduced a requirement for data plans of at least $20 or $30 to gain a 3G phone. Total ARPU was $50.75, down 2.2% from Q408 and also down from $51.04 in Q309.