Verizon adds 1.2 million connections, margins stay steady

Although Verizon Wireless (NYSE:VZ) failed to match the spectacular number of customer additions posted by rival AT&T Mobility (NYSE:T) in the third quarter, the nation's largest wireless operator did manage to best AT&T on margins with a relatively unchanged figure. In its third quarter Verizon Wireless reported 1.2 million new wireless connections (AT&T reported 2.6 million) and EBITDA margins steady at 47.2 percent, the same as in its second quarter (AT&T's wireless service margin declined to 37.6 percent from 43.1 percent in second quarter).

Click here for key slides on Verizon’s wireless business from the company’s third quarter earnings presentation.Verizon's unchanged margin is notable because other operators have seen pressure on their margins thanks to smartphone device launches that require higher subsidies.

On the data front, Verizon executives during an earnings call with investors touted the company's data revenues, which were $5.1 billion for the quarter. When questioned about Verizon's reported move to a tiered data pricing structure, Verizon CFO John Killian said that although the company has not formally announced any changes in its data pricing, it will roll out a data promotion next week that is focused on the fourth quarter buying season. (Engadget reported Verizon on Thursday will introduce a new tier of data plans for smartphones at $15 for 150 MB.)

In addition, Killian said Verizon likes the concept of tiered pricing, and will introduce more pricing changes when Verizon rolls out 4G later this year. 

Here is a breakdown of other key metrics for Verizon's third quarter:

Revenues: Verizon had total wireless revenues of $14.2 billion, up from $13.8 billion at the end of second quarter.

Net adds: Verizon added 584,000 postpaid subscribers and 137,000 prepaid subscribers. Reseller customers totaled 550,000. The company also added 251,000 connected devices. Verizon's total wireless connections reached 101.1 million at the end of the third quarter, and its customer base hit 93.2 million.

ARPU: Average revenue per user clocked in at $51.99. Retail data ARPU was $18.61

Churn: Postpaid churn was 1.07 percent. Retail and total customer churn was 1.43 percent and 1.36 percent, respectively.

Data revenues: Total data revenues were $5.1 billion, an increase of 26.3 percent year over year and up from $4.8 billion at the end of second quarter. Data revenues increased to 35.7 percent of all service revenues, up from 30.5 percent in third quarter of 2009.

Devices: Around 23 percent of Verizon's postpaid retail base owned smartphones at the close of the quarter, and company executives believe there is still plenty of room for growth. In addition, 43 percent of device sales from the direct sales channel were smartphones, and 60 percent of existing postpaid customers buying smartphones were new to the category.

Messaging: In the third quarter, Verizon customers sent or received more than 183 billion text messages and sent nearly 3.8 billion picture messages. Customers also downloaded nearly 22 million music and video files. Verizon executives said that messaging still makes up 60 percent of data revenues, but that revenue from Web and email increased to more than $2.7 billion this quarter, which is a 43 percent increase from a year ago.

For more:
- see this release
- see this Bloomberg article
- see this WSJ article (sub req.)
- see this FierceWireless Q3 earnings page 
- see these key slides from the Verizon 3Q earnings presentation

Related Articles:
AT&T's margins take a hit after activating a record 5.2M iPhones in Q3
Appraising U.S. wireless operators in the second quarter
Verizon adds 1.4M subs in Q2, as reseller customers swarm ranks  

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