(Adds analyst comment, churn context, updates stock price)
By Marina Lopes
July 22 Verizon Communications Inc, the
largest U.S. wireless telecommunications company, on Tuesday
reported better-than-expected quarterly revenue on a jump in
wireless customers and a surge in tablet sales.
The increase in customers is a boost for Verizon, which has
been reluctant to follow rivals like T-Mobile US Inc
which have discounted aggressively.
Profit in the second quarter also topped Wall Street
Net additions of wireless subscribers with contracts surged
53 percent to 1.4 million in the second quarter ended June 30.
That included a record 1.15 million in tablet sales.
Wireless companies have been weaning customers from plans
that subsidize equipment financing over two years, and offering
plans that separate service charges from equipment purchases.
Verizon has not been aggressively promoting such plans, and
said only 18 percent of wireless customers signed up for them.
"We want our customers to have choice. We did not abandon
the legacy model when we launched our installment plan as other
carriers have," said Fran Shammo, Verizon's chief financial
Two-year pricing plans have long served as a natural buffer
against customer switching, according to Craig Moffett, chief
analyst at MoffettNathanson.
"Verizon has maintained all along that the industry
shouldn't be so quick to abandon a strategy that has served it
awfully well for last decade," said Moffett.
"The risk is that the other carriers will continue to test
lower and lower prices until the market finds a new equilibrium
and that Verizon will be increasingly isolated at the high end
of the market," he added.
The company has focused on retaining customers who bring
more monthly revenue and switching them to products such as
smartphones and tablets that generate more profit.
Despite its premium prices, the company has been able to
reduce customer defections, with an average rate of 1.25 percent
compared with 1.37 percent last quarter.
Verizon's wireline revenue rose for the first time in seven
years due to increased adoption of its FiOS internet and
television products, as well as the migration of customers from
older copper lines, to better performing fiber.
The company said it added 100,000 FiOS video customers and
139,000 net new FiOS Internet connections in the quarter.
Verizon shares edged up 0.3 percent at $50.85. The stock has
risen about 3 percent so far this year, underperforming the S&P
500, which is up 7.4 percent.
Excluding items, the company earned 91 cents per share in
Analysts, on average, expected a profit of 90 cents per
share on revenue of $31.12 billion, according to Thomson Reuters
Verizon's wireless revenue, which accounts for more than
two-third of total revenue, rose 7.5 percent due to strong
growth in service revenue.
Average monthly revenue per account rose 4.7 percent to
(Reporting by Marina Lopes in Washington; Additional reporting
by Soham Chatterjee in Bangalore; Editing by Kirti Pandey and