LTE growth but net adds slowdown at Verizon

Verizon Wireless's LTE network now covers two-thirds of the US population and its quarterly results showed a strong uptick in 4G adoption, but overall its net additions of postpaid customers dropped off. The carrier also hinted at stronger support for WP7 later this year as it looks to extend its 4G-capable smartphone range.

The operator currently offers only one handset running Microsoft's OS, and has not yet signed up for Nokia's new Lumia range, though the companies say they have been working together. But CFO Fran Shammo said on the results call: "It is important that there is a third ecosystem brought into the mix here. We are fully support of that with Microsoft." He added that Verizon was "looking to do the same thing" with Windows Phone as it did with Android. Although T-Mobile was the first US cellco to support the Google platform, Verizon was the most aggressive in promoting it via its Droid brand, and has always had particularly close alliances with Google and Motorola Mobility. Now it hints at similar deals with Microsoft and Nokia, though Shammo offered no specific roadmaps.

Verizon needs to accelerate the migration of users to its LTE network, to boost return on its huge investment, build on its headstart over AT&T, and leverage the efficiencies of the new system. The iPhone does not help it in this respect since it does not yet support LTE, so a wide range of smartphones will be key. AT&T has already launched the Lumia 900 with great fanfare while TMo has the lower end 710.

Despite the lack of LTE, and talk of Verizon hitting back against hefty Apple subsidies, the iPhone remains the centrepiece of the offering. Verizon sold 3.2m of the devices during the first quarter, though this was down from the 4.2m bonanza of Q411 when the new 4S model became available. The iPhone still accounted for more than half of Verizon's smartphone sales in Q112, in a total of 6.3m. Smartphones now comprise about 47% of the cellco's customer base, a big leap from 32% last year.

Accoring to Shammo, two-thirds of the LTE customers own smartphones, while the rest have data-only devices. Verizon sold 2.9m LTE gadgets in the quarter, bringing its total LTE base to 8m or about 9% of its total - up from 1% a year ago when the service was in its infancy.

In other metrics, retail service revenues were up 8.9% year-on-year to $14.89bn, contributing to total wireless sales of $18.27bn, and operating income for the wireless business was up almost 20% to $5.2bn. Postpaid ARPU rose to $55.43 on a 16% rise in data ARPU, now at $23.80. Total data revenues were $6.6bn or 43% of the total service revenues.

However, despite healthy LTE progress, there was a drop-off in the number of net new additions. Verizon added just 734,000 net new customers, a 16.5% drop from the 879,000 it added during the same period last year. The number of new postpaid customers dropped 44% to 501,000, compared to 906,000 added in the year-ago quarter. That decline was offset by the addition of 233,000 net new prepaid customers but the figures suggest that most of the LTE growth is coming from within the base rather than poaching customers from other carriers.

As a group, Verizon reported a profit of $1.69bn, or 59 cents a share, up from $1.44bn, or 51 cents, a year earlier. Revenue jumped 4.6% to $28.2bn, slightly ahead of analyst forecasts.