Wireless bolsters Verizon profit despite economy

By Ritsuko Ando

NEW YORK (Reuters) - Stronger-than-expected wireless sales helped Verizon Communications Inc post a higher quarterly profit despite a fall in landline customers and worries of a slower U.S. economy, lifting its shares 12 percent.

Investors were relieved the No. 2 U.S. phone company managed to grow despite stronger-than-expected sales of Apple Inc's iPhone, which uses larger rival AT&T Inc's service.

"I think that after AT&T posted its own blowout numbers expectations had come down for Verizon, and there was skepticism whether the market was big enough for both of them to beat expectations," said Bernstein Research analyst Craig Moffett.

Verizon Wireless, owned by Verizon and Britain's Vodafone Group Plc, added a net 1.5 million subscribers in the quarter, excluding growth from acquisitions. The market had expected 1.4 million subscriber additions, according to a survey of six analysts by Reuters.

Verizon shares rose 11.76 percent to $28.03 in afternoon trade. AT&T shares rose 2.23 percent to $25.23.

Verizon's third-quarter profit rose to $1.67 billion, or 59 cents a share, from $1.27 billion, or 44 cents a share in the same quarter a year earlier.

Earnings per share before items rose to 66 cents from 63 cents, exceeding the average analyst estimate of 65 cents, according to Reuters Estimates. Revenue rose 4 percent to $24.75 billion, compared with Wall Street's view of $24.52 billion.

Chief Executive Ivan Seidenberg said the results showed the company's stability and strength in the face of economic turmoil, although he warned it would not be totally immune.

"The general consensus is that for the Christmas season, consumer spending is likely to be lighter and business spending will be somewhat curtailed until next year," he told analysts on a conference call.

Verizon also reported growth in Verizon Business sales, despite worries that corporate clients would trim their spending on technology and telecommunications.

WIRELINE LOSSES

Landline sales, as in recent quarters, was the weak spot. Residential switched access lines fell 12 percent in the third quarter, with the decline accelerating from the second quarter.

Declining landlines was a key factor behind rural telephone company CenturyTel Inc's planned acquisition of larger peer Embarq Corp for $5.8 billion, a deal announced on Monday.

Verizon was able to partly offset the decline in traditional phone sales with growth in FiOS, its high-speed Internet and video service that aims to compete with cable service providers. Verizon said it added 233,000 new FiOS TV customers and 225,000 new FiOS Internet customers.

But analysts warn that FiOS may not be enough, and that the expansion, involving massive investment in fiber-optic cables and hours of work per household, also means higher spending.