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Dow-30 Earnings: Verizon Communications – Second Quarter 2012
Telecom giant and Dow-30 component Verizon Communications (VZ - Free Verizon Stock Report) reported June-quarter earnings of $0.64 a share, a 12.3% year-over-year advance, on a 3.7% top-line improvement. Verizon shares traded modestly lower following the announcement, after they recently hit a 10-year high of $46.41 on July 18th.
It should come as no big surprise that Verizon Wireless (55% owned by Verizon Communications) was once again responsible for a lion's share of the good news, with operating revenues up 7.4% year over year, to $18.6 billion. What's more, wireless subscribers continue to consume bandwidth at a healthy clip, with data revenues increasing 18.5% in the interim, to $6.9 billion.
Moreover, it is worthy to note that wireless customer growth rebounded during the quarter, with Verizon Wireless adding 1.2 million retail net customers during the period, as opposed to only 734,000 net additions in the March quarter. Additionally, at the end of the June interim, smartphones comprised 50% of VZ Wireless' retail postpaid customer phone base, up from 47% at the end of the March quarter. This increasing metric certainly augurs well for average revenue per user (ARPU) growth (which was up 3.7% in the quarter), since smartphone users typically pay additional data-related fees.
Over the coming months, we look for data revenues to continue to grow at a rapid clip, as Verizon Wireless is in the midst of rolling out its 4G LTE (fourth-generation, Long-Term Evolution) mobile broadband network, the largest of that type in the United States. As of mid-July, this service was available to more than 230 million people in 337 markets across the United States, which equates to almost 75% of the population. In addition, in late June, Verizon Wireless launched its ShareEverything Plan, which offers customers unlimited voice minutes, text, video and picture messaging, and a shareable data allowance for up to 10 VZ Wireless devices. This should also help ratchet up ARPU going forward.
The results posted by Verizon's Wireline business were not quite as rosy, with revenues falling 3.1%, relative to the year-earlier result. Nevertheless, the segment added 134,000 net new FiOS Internet connections and 120,000 net new FiOS Video connections in the June quarter, and the overall FiOS penetration rate (subscribers as a percentage of potential subscribers) hit the 36.6%-mark, up from 33.9% a year ago.
Finally, in late June, Verizon Wireless inked an agreement with a subsidiary of Deutsche Telekom (DTEGY) T-Mobile USA Inc. to exchange spectrum in the AWS band in specific markets to meet LTE capacity needs and enable LTE expansion. The deal is contingent on the expected summer closing of Verizon's proposed spectrum transaction with SpectrumCo, Cox, and Leap.
About The Company:Verizon Communications was created by the merger of Bell Atlantic and GTE in June of 2000. It is a diversified telecom company with a network that covers a population of about 290 million and provides service to nearly 91.2 million. In the last few years, has acquired MCI (1/06) and Alltel (1/09). The company is also the largest provider of print and on-line directory information. Has a wireline presence in 28 states & Washington, D.C. and a wireless presence in every U.S. state & D.C., as well as operations in 19 countries.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.