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Verizon Wireless Q4 Income, Margins Rise

Bedminster, N.J. — Verizon Wireless grew its operating income by 30 percent in the fourth quarter and 19.4 percent for the year on single-digit gains in operating revenue in both periods. 1/21/2014 05:33:00 AM Eastern

Bedminster, N.J. — Verizon Wireless grew its operating income by 30 percent in the fourth quarter and 19.4 percent for the year on single-digit gains in operating revenue in both periods.

The operating-income gains came from rising operating margins, rising average revenue per account, an expanded subscriber base, and a growing base of 4G LTE subscribers, whose data consumption rises as they switch to faster 4G phones.

Combining smartphones and devices such as tablets, 44 percent of year-end postpaid connections were on the LTE network, up from a year-ago 23 percent, the carrier said.

Operating income gains also came from fewer fourth-quarter activations of retail postpaid smartphones, which the carrier subsidizes, compared with the year-ago quarter.

A total of 8.8 million retail postpaid smartphones were activated in the fourth quarter, down from the year-ago 9.8 million but up from the third quarter’s 7.6 million, the second quarter’s 7.5 million, and the first quarters 7.2 million. iPhone activations weren’t broken out.

The carrier upgraded fewer phones as a result of “policy changes,” said chief financial officer Fran Shammo. The end of 2012 also saw Verizon offer a free iPhone for the first time, driving up upgrade activity in late 2012, he noted.

Total operating revenues were up 5.7 percent for the quarter to $21.1 billion and up 6.8 percent for the year to $81 billion. Operating income was up 30 percent for the quarter to $6.2 billion and up 19.4 percent for the year to $26 billion.

Wireless revenues accounted for 68 percent of Verizon Communications’ consolidated revenues in the fourth quarter.

Operating income margin rose to 29.5 percent in the quarter compared with a year-ago 24 percent. For the full year, operating income margin hit 32.1 percent, up from the previous year’s 28.7 percent.

Average revenues per retail postpaid account rose to $157.21 from the previous quarter’s $155.74 and from the year-ago $146.80. For the full year, average revenues per account were up 6.9 percent, or almost $10/month.

Retail postpaid churn fell sequentially to 0.96 percent from the third quarter’s 0.97 percent. Normally, said Shammo, fourth-quarter churn rates usually rise on a sequential basis.

Retail net adds (postpaid and prepaid combined) came in at 1.65 million in the quarter and 4.47 million for the year, but they were down 26.3 percent and 24.4 percent, respectively, from the year-ago periods.

Retail postpaid net additions hit 1.57 million in the quarter, down 25.1 percent from the year ago, and hit 4.12 million for the year, down 18 percent.

The carrier’s retail subscriber base ended the year with 102.8 million connections, up 4.7 percent from the year-ago period. Out of that number, 96.8 million were retail postpaid net connections, up 4.6 percent.

A total of 8.8 million retail postpaid smartphones were activated in the fourth quarter, up from the third quarter’s 7.6 million, the second quarter’s 7.5 million, and the first quarters 7.2 million. iPhone activations weren’t broken out.

Smartphones accounted for 88.9 percent of total postpaid phones activated in the quarter and 85.7 percent for the year.

As a result, by year’s end, smartphones accounted for 70 percent of the phones operating on the Verizon network, up from a year-ago 58.1 percent.

LTE phones account for a growing share of smartphone activations. In the fourth quarter, 87 percent of smartphones activated were 4G LTE smartphones.

Overall, the total number of retail postpaid-device activations, consisting of phones and products such as tablets, hit 11.5 million in the quarter, the most of any quarter of the year, but were down 10.9 percent from the year-ago quarter A total of 790,000 tablets were activated in the quarter, marking the carrier’s best quarterly showing. That brought the number of tablets activated in the year to 1.9 million. The tablet subscriber base came to 3.6 million at year’s end.

In other comments, Shammo also discounted perceptions of a price war among carriers, noting that there has been “not much of a price decrease,” just a “shift” in prices to handset prices from service prices.