Wireless drives Verizon sales

By Ritsuko Ando

NEW YORK (Reuters) - Verizon Communications Inc (VZ.N) reported a better-than-expected quarterly profit on Monday driven by strong wireless subscriber growth, though analysts were unimpressed by its Internet subscription sales.

Depsite the threat of subscriber losses to Apple Inc's (AAPL.O) iPhone, which is only available on AT&T Inc (T.N), Verizon Wireless's customer growth exceeded Wall Street expectations and made up for slowdown in Verizon's landline, or wireline, business.

"It's a story of tremendous strength in wireless and continued deterioration in wireline," said Sanford C. Bernstein analyst Craig Moffett.

Verizon Wireless, a joint venture with Vodafone (VOD.L), added 1.8 million net retail customers in the quarter, taking total subscribers to 63.7 million. It accounts for about half of Verizon Communications' revenue.

"If I was AT&T I'd be a little disappointed I wasn't able to take more market share from Verizon Wireless," said Stifel Nicolaus analyst Chris King.

Verizon's third-quarter net income was $1.27 billion, or 44 cents per share, compared with $1.92 billion, or 66 cents a share, a year earlier.

Excluding items such as merger integration costs, access line spinoff-related charges and international taxes, profit was 63 cents per share, a cent above the analysts' average forecast of 62 cents, according to Reuters Estimates.

Operating revenue rose to $23.77 billion, slightly above the $23.6 billion forecast by Wall Street.

The company also said it would increase its 2007 share buyback target by 25 percent to $2.5 billion. Verizon repurchased nearly $800 million of its shares in the quarter.

Verizon shares rose 0.6 percent to $45.85 on the New York Stock Exchange. Analysts said the gains were muted since the shares had already risen around 10 percent in 3 months.

FIOS ON TRACK

In addition to the wireless venture, Verizon has been banking on growth in a high-speed Internet service called FiOS to make up for a slowdown in its traditional phone business.

The all-fiber network also allows it to offer video, enabling it to compete against cable operators' all-in-one packages of television, phone and Internet.

Verizon added 202,000 new FiOS TV subscribers in the third quarter, taking the total to 717,000. It added 229,000 FiOS Internet subscribers.

"What's kind of changed in my view of Verizon is that they're putting up some real TV numbers. We're almost getting to a point where the revenue is almost going to offset consumer access line losses," said Patrick Comack at Zachary Investment Research.