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Verizon Communications (VZ - Free Verizon Stock Report), a telecommunications giant and Dow-30 component, reported September-period share net of $0.78, two pennies above our estimate and a hefty 22% improvement on the year-earlier figure, on a solid 4.4% top-line improvement. As is typically the case, a lion's share of the good news may be attributed to the company's wireless business, and prospects at the traditional wireline division seem to be improving.

During the third quarter, Verizon Wireless (55% owned by Verizon Communications) added 927,000 retail postpaid net subscribers, bringing Verizon's total number of retail connections to 101.2 million, up 5.5% from the year-earlier figure. Total Wireless revenues came in at $20.4 billion, up 7.2% year over year, driven, in part, by a 7.1% increase in retail postpaid ARPA (average revenue per account). Verizon Wireless recently decided to report ARPA instead of ARPU, following the rollout of the Share Everything Plan and as customers continue to add multiple devices to their accounts. What's more, at the end of the most recent interim, smartphones accounted for more than 67% of the Verizon Wireless retail postpaid customer phone base, up from 64% at the end of the June quarter. Any uptick in this metric augurs well for ARPA growth going forward, as smartphone users typically pay additional data-related fees.

Finally, wireless operating income margins continue to improve, after coming under a good deal of pressure last year, due to the introduction of the iPhone, which comes with a pretty significant subsidy. To wit, June-quarter wireless operating income margin came in at 33.9%, up from 31.8% a year ago.

Separately, Verizon Wireline's performance during the third quarter picked up a bit, with consumer revenues up 4.3%, relative to the prior-year figure, with most of the good news coming from the company's FiOS service. Verizon added 173,000 new customers to its FiOS Internet service and 135,000 to its FiOS video service. Most important, though, was the modest sequential improvement in wireline total revenue, which has been under pressure recently due to many corporate and government customers reining in their spending.

Lastly, in mid-September, Verizon and Vodafone Group (VOD)inked an agreement for Verizon to buy Vodafone's 45% stake in their U.S. wireless joint venture, Verizon Wireless, for $130 billion. This transaction, which would be the third-largest deal in corporate history, stipulates that Vodafone will receive $58.9 billion in cash, $60.2 billion in Verizon stock, and an additional $11 billion from smaller transactions. Verizon has subsequently arranged financing for the deal and is set to offer $49 billion in new debt and has an agreement to receive $12 billion in term loans to help finance the transaction. The issue remains a quality choice for income.

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.