Verizon adds 3.2M LTE devices in Q2, now has 50% smartphone penetration

Verizon Wireless' (NYSE:VZ) expansion of its LTE network and subscriber base continued apace in the second quarter, as the carrier reported 3.2 million LTE device activations, up from 2.9 million in the first quarter and its most ever in a quarter. The company now counts 10.9 million LTE connections, up from 8 million in the first quarter. Verizon also grew its wireless margins to a record high in the quarter.

Click here for key slides from Verizon's second-quarter earnings presentation.

Verizon also activated 2.7 million Apple (NASDAQ:AAPL) iPhones in the quarter, down from 3.2 million in the first quarter.

Overall, the company added 1.2 million net retail subscribers in the quarter, down from 2.2 million in the year-ago quarter. The company also notched 880,000 net postpaid subscriber additions, down from 1.3 million in the year-ago quarter but above the 660,000 analysts had estimated, according to Reuters. Verizon also had 290,000 retail prepaid net additions. At the end of the second quarter Verizon had 94.2 million total retail customers, and it counted 88.8 million total retail postpaid customers.

On the company's earnings conference call, Verizon Communications CFO Fran Shammo said that early reaction to the company's shared data plans, dubbed "Share Everything," has been positive. The plans, which went into effect for new customers June 28, generated concern among customers last month who were worried they would lose their unlimited plans (no existing customers are forced to upgrade to the plans, but customers with legacy unlimited plans will lose them if they want a subsidized handset when they upgrade).

Shammo said it is very early in the process but that the company is seeing more adoption of the Share Everything plans than it had expected. He said Verizon is seeing some unlimited 3G data customers sign up for LTE service under the Share Everything plans, which he said is positive for the company in the long term.

Shammo also said the company is still confident it will receive regulatory approval later this summer for its $3.9 billion deal to acquire AWS spectrum from SpectrumCo (a joint venture of cable companies Comcast, Time Warner Cable and Bright House Networks) and Cox Communications. Last week a wall Street Journal report said the FCC was likely to approve the deal, but that the Department of Justice is reportedly holding up its approval of the spectrum deal unless Verizon and the cable companies can convince the agency that their joint marketing deals won't impact competition. In late June T-Mobile USA and Verizon agreed to swap AWS spectrum, which many saw as a step toward getting approval for the deal.

Here's a breakdown of the other key metrics for Verizon in the quarter:

Financials: Verizon reported total operating revenue of $18.57 billion, up from $17.29 billion in the year-ago period. Total retail service revenue clocked in at $15.23 billion, up from $14.01 billion in the year-ago quarter. Data revenue was $6.9 billion, up 18.5 percent year-over-year from $5.8 billion--data revenue now represents 43.6 percent of all service revenue, up from 39.5 percent year ago. Verizon said its wireless segment EBITDA margin was 49 percent in the quarter--a record high--up from 45.4 percent in the year-ago quarter and 46.3 percent in the first quarter of 2012.

Smartphones: The carrier sold 5.9 million smartphones in the quarter, including 2.9 million Android smartphones and 2.7 million iPhones. At the end of the second quarter fully 50 percent of Verizon's retail postpaid customer base had a smartphone, up from 47 percent in the first quarter of 2012. Smartphones represented 73 percent of all Verizon's postpaid phones sold in the quarter, up from 59 percent in the year-ago period. 

LTE:  Verizon said its LTE network now covers 230 million POPs in 337 markets across the country, or nearly 75 percent of the population.

ARPU: Retail postpaid average revenue per user was $56.13 in the quarter, up from $54.12 in the year-ago quarter. The increase in ARPU was Verizon's highest in three years. Retail data ARPU was $24.53, up from $21.26 in the year-ago period.

Churn: Verizon reported retail postpaid churn of 0.84 percent, down from 0.89 percent in the year-ago period. Total retail churn was 1.11 percent, down from 1.22 percent in the second quarter of 2011.

For more:
- see this release
- see this Reuters article
- see this Bloomberg article

Special Report: Wireless in the second quarter of 2012

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