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Verizon Wireless Posts Strong Q2 Revenue, Income Gains

Bedminster, N.J. – Verizon Wireless posted strong gains in wireless operating revenue, margins, and income in the second quarter, thanks to a rising number of more profitable retail postpaid subscribers and a rise in revenues per account.

 The carrier attributed rising revenues per account to rising data consumption driven by rising 4G LTE adoption rates and by the carrier’s Share Everything plans.

Nonetheless, the number of net new retail subscribers (prepaid and postpaid combined, excluding reseller and M2M connections) fell 11.9 percent in the quarter compared to the year ago because of a 66.6 percent drop in prepaid net adds to 97,000. The drop failed to offset a year-over-year 6 percent gain in the number of net new retail postpaid subs to 941,000, which was up on a sequential basis by 40 percent from 720,000.

The company expects sequential gains in the number of net new retail postpaid subscribers to continue through the second half.

The company also posted a “fairly substantial” increase in the number of net new subscribers captured by companies that resell Verizon service, Verixon Communications CFO Fran Shammo said.

For the quarter, wireless operating revenues rose 7.5 percent to $20 billion, and revenues were up in the first half by 7.2 percent to $39.5 billion. Wireless operating income margin rose to 32.4 percent, up from 30.8 percent a year ago, and for the half to 32.6 percent from a year-ago 29.7 percent.

In turn, wireless operating income rose 13.1 percent in the quarter to $6.5 billion and in the half by 17.9 percent to $12.9 billion.

Shammo attributed wireless revenue and income growth in part to the expansion of LTE to 99 percent of the company’s 3G footprint and continued LTE device adoption, which in turn contributes to greater data usage and drives consumers into higher tier data plans.

Verizon experiences an “incredible jump” in data usage when consumers step up to 4G LTE from 3G, he said.

He also said the carriers’ Share Everything plans entice consumers to buy additional data devices. In the year since Share plans were launched on June 28, 2012, 36 percent of retail postpaid accounts have adopted one of the plans, up from a year-ago 1 percent and from the first quarter’s 30 percent, he said.

Average revenues per retail postpaid account rose 6.4 percent year-over-year in the quarter to $152.50, he added.

In recounting other performance metrics, Shammo said 7.5 million smartphones were activated in the quarter, up from a year-ago 5.9 million and up sequentially from the first quarter’s 7.2 million. Smartphones accounted for 84.4 percent of all phones activated in the second quarter on Verizon’s network, up from 71.6 at the end of the year-ago quarter.

A total of 51 percent of the smartphones sold in the second quarter were iPhones, or 3.825 million, up from the year-ago period but down sequentially from the first quarter’s 4 million. iPhone’s share of smartphone unit sales also fell slightly on a sequential basis from the first quarter’s 55.6 percent.

The rising percentage of smartphone activations in turn boosted the percentage of retail postpaid subscribers using a smartphone to 64.4 percent, up sequentially from 61 percent and up from a year-ago 49.7 percent.

The percentages of smartphones and tablets sold with LTE continue to grow, Shammo continued. Of smartphones sold in the quarter, 72 percent were equipped with LTE, eh said.

The number of LTE devices (smartphones, tablets and modems) activated in the quarter grew to 10.1 million, up sequentially from the first quarter’s 9.7 million and up 7.5 percent from the year-ago 9.4 million.

Overall, LTE devices accounted for 33 percent of all retail postpaid connections in use, up sequentially from the first quarter’s 28.2 percent and the year-ago 12.2 percent.

A total of 28 percent of new retail postpaid smartphone activations were new subscribers to the Verizon network, down sequentially from 27 percent, the company noted.

In other metrics, the carrier reported that in the first half, the number of net new retail subscribers (postpaid and prepaid combined) fell 8.1 percent to 1.76 million, with prepaid net adds falling 73.2 percent to 140,000 and retail postpaid net adds rising 16.5 percent to 1.62 million.

The company’s retail subscriber base nonetheless expanded 6.3 percent from the year-ago period to 100.1 million. The postpaid portion of the retail base expanded 6.1 percent to 94.3 million, and the prepaid portion of the retail base grew 10.1 percent to 5.9 million.