Monday, November 1, 2010

Verizon Profit Beats Estimates as Smartphone Popularity Grows


Verizon Communications Inc., the second-largest U.S. phone company, reported third-quarter profit that beat analysts’ estimates after more customers bought smartphones and signed up for data plans to operate them.

Profit, excluding payments related to its pension fund and charges from sales and acquisitions, was 56 cents a share, the New York-based company said in a statement today. Analysts in a Bloomberg survey had predicted 54 cents per share.

Verizon has added new mobile phones to its network to boost growth as older businesses, such as home phones and wireless- voice service, stagnate or decline. Verizon has increased the number of smartphones under its Droid brand with Android operating systems. Customers paid an average of $18.61 a month for data plans, up 19 percent from a year ago.

“Verizon has been doing exceedingly well with its Android launch,” said Craig Moffett, an analyst at Sanford C. Bernstein & Co. in New York, who rates the shares “underperform” and doesn’t own any. “They’ve had a pretty steady diet of sexy new phones, and they’ve really closed the gap versus the iPhone.”

The company added 584,000 new wireless customers on monthly contracts. That fell short of the 625,000 that analyst Tim Horan at Oppenheimer & Co. had forecast. Simon Flannery, an analyst at Morgan Stanley, estimated 665,000.

Verizon declined 43 cents, or 1.3 percent, to $32.09 in New York Stock Exchange composite trading at 4 p.m. The shares have gained 3.7 percent this year.

Improving Outlook

Revenue for the quarter was $26.5 billion. Analysts had forecast $26.3 billion, according to the Bloomberg survey. Sales a year ago, which included landline operations sold to Frontier Communications Corp., were $27.3 billion. Excluding those operations, revenue from the third quarter of 2009 would have been $25.9 billion.

Net income at Verizon, which co-owns its mobile-phone business with Vodafone Group Plc, fell to $881 million, or 31 cents a share, from $1.18 billion, or 41 cents, a year earlier.

Earnings in the second half of the year will improve by 5 percent to 10 percent over the first half of this year, Verizon said. Earnings excluding some items will be as much as $1.11 a share in the second half of the year, based on earnings per share on that basis of $1.01 through the second quarter.

Sales at the fixed-line business dropped 3.6 percent to $10.3 billion in the third quarter from a year earlier. Verizon is losing home-phone subscribers and broadband customers.

That side of the business, which contributed 42 percent of Verizon’s revenue last year, has gotten a boost from the FiOS fiber-optic network. FiOS, which sells high-speed Internet access and high-definition television service over the fiber lines, added 226,000 Web and 204,000 video subscribers.

LTE, IPhone

Verizon will start selling service on a new wireless network this quarter that will improve data speeds, making applications like streaming, high-definition video and low-delay online games possible. The fourth-generation technology, called long-term evolution, will be introduced in 38 markets by the end of the year, including Boston, New York, Washington and Miami.

LTE will give customers data speeds that are 10 times faster than Verizon’s existing 3G service, Chief Operating Officer Lowell McAdam has said.

Verizon will also start selling Apple Inc.’s iPhone early next year, two people familiar with the companies’ plans said in June. Rival AT&T Inc. has had sole domain over the popular, touch-screen smartphone in the U.S. since its introduction in 2007. AT&T activated 5.2 million of the phones last quarter, the company said yesterday.