Verizon adds 2M iPhones, 1.4M LTE devices in Q3

Verizon Wireless (NYSE:VZ) continued to see strong growth in demand for its LTE devices and network in the third quarter, though the company reported a slight decline in Apple (NASDAQ:AAPL) iPhone activations.

Click here for key slides from Verizon's third quarter wireless performance.

Verizon said it added 2 million iPhone 4s in the quarter, down from 2.3 million in the second quarter and 2.2 million in the first quarter. The slight decline came ahead of anticipation for the iPhone 4S, which Verizon launched Oct. 14. Verizon Communications CFO Fran Shammo said on the company's earnings conference call that Verizon sold out of its stock of the iPhone 4S in its first day of availability. In the third quarter, Verizon continued to see around 20 percent of its iPhone customers being new customers and 80 percent upgrading. Shammo said he expected that trend to continue in the fourth quarter. 

"Wireless results were clearly held back by anticipation of the new iPhone launch, and growth should accelerate nicely in 4Q," Credit Suisse analyst Jonathan Chaplin wrote in a research note. "However, the iPhone will likely exact a heavy toll on margins making it unlikely that the company beats on EPS or that expectations for 2012 EPS increase from here."

Here is a breakdown of Verizon's key quarterly metrics:

LTE: Verizon now has LTE in 165 markets, covering 186 million POPs. The company plans to have 175 markets covered by Nov. 17, have two-thirds of the country covered with LTE by mid-2012, and finish covering its 3G footprint with LTE by the end of 2013. Verizon sold 1.4 million LTE devices in the quarter, up from 1.2 million in the second quarter and 500,000 in the first quarter. Of its 1.4 million LTE devices in the quarter, Shammo said just over half of them were smartphones and the rest were data-only devices.

Smartphones: Shammo said Verizon's smartphone penetration in the third quarter was 39 percent, up from 36 percent in the second quarter and 24 percent in the year-ago period. The company activated 5.6 million smartphones in the quarter, which was 60 percent of all postpaid device activations.

Data-only devices: Verizon said its data-only devices have an average revenue per user of around $49, and Shammo said it is important for Verizon to continue to expand the category. Shammo also said 8 percent of its retail subscriber base is now made up of data-only devices and that 95 percent of its data-only device sales in the quarter were LTE devices.

Subscribers: Verizon added 1.3 million total connections in the quarter, including 882,000 retail postpaid customers, 86,00 retail prepaid customers and 367,000 wholesale and other connections. At the end of the quarter, the company had 107.7 million total connections, an increase of 6.5 percent year-over-year, consisting of 90.7 million retail customers and 17.0 million wholesale and other connections.

    ARPU: The carrier's retail postpaid ARPU grew 2.4 percent over third-quarter 2010, to $54.89. Retail postpaid data ARPU increased to $22.22, up 15.7 percent from the year-ago period. Retail service ARPU also grew 2.4 percent, to $53.21.

    Churn: Retail postpaid churn in the quarter was 0.94 percent in third-quarter 2011, a slight improvement from the year-ago period. Total retail churn was 1.26 percent, also slightly down from a year ago.

    Financials: Verizon's total wireless service revenues clocked in at $15 billion, up 6.1 percent from the year-ago quarter. Data revenues were $6.1 billion, up more than $1 billion or 20.5 percent year-over-year, and representing 40.6 percent of all service revenues. Total revenues were $17.7 billion, up 9.1 percent from the year-ago period. The carrier's service EBITDA margin on service revenues was 47.8 percent, the highest Verizon has ever reported.

      For more:
      - see this release

      Special Report: Wireless in the third quarter of 2011

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