Friday, October 22, 2010

Verizon Gains Fewer Subscribers, But Profits Still Up

As AT&T gained iPhone subscribers, Verizon signed up the lowest number of new customers in 10 years during the third quarter. Verizon still saw profits rise six percent, but profits for parent Verizon Communications fell 25 percent. Verizon is expected to gain Apple's iPhone, and AT&T appears to be preparing for the loss of its iPhone exclusivity.

AT&T's iPhone subscriptions seem to have taken a toll on Verizon Wireless in the third quarter. Just-released figures show Verizon gained 997,000 new customers, the lowest in 10 years.

That figure includes 584,000 monthly contracts as profits rose six percent over the same quarter in 2009. Service revenues were up 7.7 percent and data revenues 26.3 percent.

Five Million iPhones

By contrast, rival AT&T signed up 2.6 million new subscribers during the same period and activated 5.2 million iPhones, up 62 percent from the previous quarter. Most of the activations were for existing customers, and only 1.25 million were for new customers.

Verizon, the largest U.S. carrier, now has 93.2 million customers using 101.1 million total connections.

AT&T is the exclusive U.S. carrier for the iPhone, but is widely expected to lose that advantage early next year with Apple preparing a new version of the iPhone for Verizon's CDMA system. The Wall Street Journal this month said the device is set to be manufactured by Taiwan-based Pegatron.

By all accounts, AT&T is getting ready for life after its iPhone exclusive by gearing up its sales force to push all its products. The carrier is the only one that sells handsets powered by all of the top iPhone rivals: Research In Motion's BlackBerry, Google Relevant Products/Services's Android, Microsoft Relevant Products/Services's Windows Phone 7 Series, Hewlett-Packard's webOS, and Nokia's Symbian.

"They do have lots of devices coming to the market, and a lot comes down to consumer preference and device preference," said Gartner research analyst Michael Gartenberg. "If you want a Windows phone or an iPhone, you can't get those at Verizon. In some cases it's the carrier that's the driver Relevant Products/Services."

Not a Sprint

"AT&T and Verizon both have good products, so it's a marathon and not a sprint," he said. So one quarter "doesn't mean all that much in the long term."

Sharing the iPhone could be good for both carriers, Gartenberg said, because unlike some phones that sell better over the summer or at the holiday season, "the iPhone defies the seasonality. People buy them no matter what."

Verizon's parent, Verizon Communications, saw an overall drop in profits of 25 percent to $881 million in the third quarter, compared to $1.176 billion a year ago. Verizon reported a gain of 226,000 customers for its FiOS Internet service and 204,000 customers for its fiber-optic TV service, making a total of 3.9 million total Internet customers and 3.3 million TV customers.

"Verizon built on a strong second quarter with a stronger third quarter, resulting in improved earnings performance and substantial cash flow," said Chairman and CEO Ivan Seidenberg. "We are building momentum and are on track to achieve our goal of growing earnings in the second half of the year. We are excited by the opportunities we see to expand wireline margins and the growth we see related to the upcoming launch of next-generation wireless services."

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