Wireless Unit Helps Compensate for Decline In Land -Line Business
Verizon Communications Inc.'s profit climbed 9.8% as the telecommunications carrier took the biggest share of the industry's best wireless customers.
As with rival AT&T Inc., Verizon's results suggest the industry is largely shrugging off the effects of a slowing economy.
"We're really not seeing a change in trends," Chief Financial Officer Doreen Toben said in an interview. "How many people are really going to drop their wireless phone?"
In March, Ms. Toben reassured Wall Street that the New York telecom giant was on track to duplicate its solid performance from last year but hinted that an economic slowdown was making a small dent in its wireless business. In the past several months, telecom operators have signaled to varying degrees that they were being affected by broader economic problems as consumers pulled back on spending. Cable operators and satellite operators have also partly blamed lackluster results on the souring economy.
In focus has been the rate of customers who have canceled their services because they could no longer afford to pay their bills. Ms. Toben said during a conference call Monday the rate in the landline side had improved, while the wireless side had stabilized.
Like AT&T, which has posted more rapid profit growth than Verizon in the past two quarters, wireless business drove Verizon's total results. Revenue rose 13% at Verizon Wireless, a joint venture with Vodafone Group PLC. The turnover rate rose to 1.18% from 1.08% a year earlier. Average monthly revenue per customer rose 1.3%.
New-subscriber growth slipped 12% to 1.5 million, putting total subscribers at 67.2 million. More important, 1.3 million of the new customers were ones who signed long-term contracts, or nearly twice as many as AT&T had in the first quarter.
The $99 unlimited-calling plans, which all the major carriers unveiled in February, were driving growth in high-end consumers and' helped results, said Dennis Strigl, chief operating officer of Verizon.
The wireless unit's performance is compensating for the deteriorating land-line business. The 13% increase in revenue at Verizon Wireless helped offset the 1.4% decline in wire-line revenue Verizon's total base of phone fell 8.2%.
"Wire line is losing the battle, but wireless is winning the war," said Moffett, an analyst at Sanford C. stein & Co. LLC.
Broadband connections stood at 8.5 million as of March 31, up 15%. Sales of wireless and Internet services have helped phone companies such as Verizon and AT&T ease the impact of declining sales of fixed lines.
Verizon added 263,000 FiOS TV customers, taking the total to 1.2 million on March 31. Verizon is using FiOS as its weapon to beat back cable television operators that offer all-in-one packages of video, phone and internet services.
Shares of Verizon were up 91 or 2.5%, to $37.95 in 4 p.m. New York Stock Exchange composite trading.
By: Roger Cheng
Wall Street Journal; April 29, 2008
