Verizon Mobile disappoints ahead of iPhone

By Reuters
Posted Oct. 22, 2010 at 11:43 a.m.

Verizon Communications Inc.’s wireless business lost more ground than expected to AT&T in the third quarter, pushing shares down 2 percent.

Verizon Wireless, its venture with Vodafone Group is widely expected to sell Apple’s iPhone early next year, but for now it is playing catch-up to AT&T, the exclusive U.S. iPhone carrier.

Until then, growth at Verizon Wireless, the biggest U.S. mobile operator, depends heavily on cellphones based on Google Inc’s Android, including Motorola Inc’s Droid X and HTC Corp phones.

So far, that strategy has kept Verizon behind its smaller competitor’s iPhone-backed growth. Verizon’s mobile customer growth of 997,000 fell short of analyst expectations of more than 1 million.

Investors are disappointed with the slowdown in growth in wireless customers, said Mizuho analyst Michael Nelson, adding “Nobody knows for sure when they’re going to get iPhone. Verizon hasn’t done anything to satisfy investors interest.”

Verizon Wireless said its net new monthly-bill paying customers, the most valuable category, came in slightly ahead of expectations at 584,000 compared of the average expectation for 580,000 from six analysts contacted by Reuters.

But this was behind AT&T’s 745,000 additions, reported the day before.

Chief Financial Officer John Killian said wireless revenue growth would speed up even if customer growth is unchanged as he sees more customers buying smartphones that come with extra fees for data service as the company expands its phone range.

Killian, who is about to retire, forecast fourth quarter postpaid customer growth in a rough range of 550,000 to 600,000 and said service revenue growth would increase in time from its current 7 percent level to AT&T’s 10 percent growth range.

“They’re ahead of us with the percentage of customers that have a smartphone,” Killian conceded in an interview but added, “That’s upside for us.”

Verizon’s third-quarter net profit fell to $881 million, or 31 cents per share from $1.18 billion, or 41 cents a share in the same quarter a year earlier.

Excluding 25 cents per share in charges from a pension related settlement and other items, Verizon’s earnings per share were 56 cents, 2 cents ahead of the average estimate from Wall Street analysts, according to Thomson Reuters I/B/E/S.

Revenue fell to $26.48 billion from $27.27 billion in the year-ago quarter, slightly ahead of the average analyst estimate for $26.35 billion.

Excluding year-earlier revenue from the wireline assets it sold to Frontier Communications in July, Verizon’s revenue rose 2.1 percent.

Verizon said its adjusted earnings for the second half of 2010 would be at the high end of its previously announced forecast range for a 5 percent to 10 percent increase from its $1.01 earnings per share in the first half of the year.

Verizon added 226,00 new customers to its FiOS high-speed Internet service and 204,000 new FiOS video customers, slightly ahead of some analyst expectations.

Its shares were down 2 percent at $31.85 in midday trading on the New York Stock Exchange.

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