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Postpaid, 4G, Smartphones Drive Verizon Wireless Revenue, Income Gains

Bedminster, N.J. – Verizon Wireless activated 1.9 percent fewer new retail subscribers in the first quarter compared to the year-ago period but nonetheless boosted total wireless operating revenues by 6.8 percent to $19.5 billion and wireless operating income by 23 percent to $6.42 billion.

Wireless operating income margin hit a record high of 32.9 percent, up from the year-ago 28.6 percent and the fourth quarter’s 24 percent, when sales of heavily subsidized smartphones are at their peak. Margins in 2012’s other two quarters were 30.8 percent and 31.8 percent.

Revenue gains came from rising adoption of smartphones and Internet devices, rising adoption of 4G LTE that in turn drives increased data usage, and better-than-expected adoption of the company’s Share Everything postpaid plans, which require new subscribers to pay for unlimited talk and messaging. Together these developments helped boost average revenue per account (ARPA) to $150.27 from a year-ago $140.58 and from the fourth quarter’s $146.80.

Verizon activated more smartphones and 4G LTE devices in the first quarter than it did a year ago, the company noted. And it said 30 percent of its retail postpaid accounts were in Share Everything plans in the quarter.

Also contributing to revenue and profit gains was a 35.1 percent year-over-year increase in retail postpaid net connection additions to 677,000. Postpaid subscribers generate more revenue for carriers than prepaid subscribers.

The number of net new prepaid retail subscribers, on the other hand, fell 81.5 percent to 43,000.

Total net new connections were down 1.9 percent to 720,000 for the quarter compared to the year-ago period, but the retail connection base expanded to 98.9 million, up 6.4 percent from the year ago.

The company attributed a rising retail churn rate of 1.3 percent, up from a year-ago 1.24 percent, to stepped-up bad-debt collections that led to an increase in involuntary churn. CFO Fran Shammo, however, pointed out that the 1.3 percent churn rate is the lowest in the industry.

As for smartphone adoption, Verizon said a total of 7.2 million retail postpaid smartphones were activated in the quarter, up from a year-ago 6.3 million, representing 85.1 percent of all retail postpaid phones in use on the network, up in turn from the year-ago 72.4 percent.

Of the 7.2 million smartphones activated, iPhones accounted for 4 million, or 55.6 percent, up from the year-ago 3.2 million. iPhone’s share of smartphone activations also rose to 55.6 percent from the year-ago 50.8 percent.

The iPhone’s share slipped sequentially, however, from the fourth-quarter’s 63.3 percent, or 6.2 million of the 9.8 million retail postpaid smartphones sold.

First-quarter iPhone sales were evenly split between 3G models and 4G LTE models, said CFO Fran Shammo.

In all, smartphones accounted for 61.4 percent of all retail postpaid phones in use on the network, up from a year-ago 72.4 percent.

LTE, VoLTE, AWS rollouts: In other disclosures, the company said it will expand its LTE footprint by the end of the second quarter to match its 3G footprint, deploy LTE in its AWS 1.7/2.1GHz band later in the year, and offer its first VoLTE (Voice-over-LTE) phones to be available late this year in preparation for the launch of VoLTE service in early 2014.

With VoLTE, the carrier will send voice as packet data over LTE instead of over a dedicated voice circuit, freeing up capacity in the network.

Adding VoLTE throughout its footprint will enable the carrier next year to begin offering VoLTE phones that lack a CDMA chip, reducing costs and helping Verizon lower its phone subsidies, Shammo said.

The company also reported that:

–a total of 5.9 million 4G LTE devices, including smartphones, were activated in the first quarter, up from a year-ago 3.2 million.

–68 percent of handset upgrades in the quarter were 4G devices.

–About 28 percent of new retail postpaid smartphone activations were new subscribers to the Verizon network, down from 28 percent in the fourth quarter.

–The total number of retail postpaid LTE devices in use rose to 26.3 million, or 28.2 percent of all retail postpaid connections, up from a year-ago 8 million, which represented 9.1 percent of retail postpaid connections.

–On a consolidated basis combining wireless and wireline operations, Verizon Communications posted a 4.1 percent gain in operating revenues to $29.4 billion and a 24.3 percent gain in net income to $4.86 billion.