Verizon Wireless' (NYSE:VZ) 4G LTE marketing efforts appear to be paying off. During its first quarter earnings report, the company sold 2.9 million LTE devices in the quarter, up from 2.3 million in the fourth quarter, bringing its total number of LTE subscribers to 8 million, or approximately 9 percent of its postpaid base.
Click here for key slides from Verizon's first quarter earnings presentation.
The company also said it activated 3.2 million Apple (NASDAQ:AAPL) iPhones in the quarter, a decline from 4.3 million iPhone activations in the fourth quarter.
Despite its strong showing in LTE, Verizon's retail net subscriber additions were just 734,000, down from 1.45 million in the fourth quarter. Verizon Communications CFO Fran Shammo said the decline was seasonal, noting that the fourth quarter is always a very strong quarter because of the holiday buying season.
The Tier 1 operator reported retail wireless revenue of $14.9 billion in the quarter, up from $14.6 billion in the fourth quarter and an increase from $13.7 billion in first quarter 2011. In addition, it reported total service revenue of $15.4 billion, up from $15.1 billion in fourth quarter and an increase from $14.3 billion in first quarter 2011. Shammo attributed the revenue growth partly to the company's accelerated postpaid growth and reduction in spending.
Verizon Wireless also reported a 28.6 percent operating income margin and a 46.3 percent EBITDA margin on service revenues.
Interestingly, Shammo reported that Verizon's total postpaid retail connections now top 93 million but the company did not reveal its total wireless connections as it has done in the past. At the end of 2011, Verizon had 108.7 million total connections. Shammo said that the company is not disclosing total connections because "M2M is more complicated." He said the main thing for investors to focus on is that the company's revenue is increasing and it is adding more customers.
Shammo also said the company spent $1.9 billion on wireless capital expenditures for the quarter, which is down about $800,000 from first quarter 2011.
Regarding Verizon's announcement yesterday of its plans to sell some of its 700 MHz spectrum licenses contingent upon its getting AWS spectrum from cable companies, Shammo said that the company is not doing this as a way to encourage the FCC to approve its deal with SpectrumCo. And he said that contrary to some media reports, Verizon will not be selling this 700 MHz spectrum at below-market prices. "This is not a fire sale," Shammo said. "It wouldn't be prudent to sell this without getting a return on our investment."
Here's a breakdown of the other key metrics for the quarter:
ARPU: Retail postpaid average revenue per user increased to $55.43, up from $54.80 in fourth quarter. Retail postpaid data ARPU was $23.80, up from $22.76 in the fourth quarter.
Smartphones: Smartphone penetration was 47 percent. The company sold 6.3 million smartphones in the quarter, of those smartphones, 3.2 million were iPhones.
LTE: Verizon said it activated 2.9 million LTE devices in the quarter. In addition, it increased its LTE coverage from 203 million POPs in fourth quarter to 209 million POPs in first quarter. It's LTE subscribers now total 8 million and make up about 9 percent of its customer base.
Churn: Postpaid retail churn was 0.96 percent, up slightly from 0.94 percent in the fourth quarter. Total churn was 1.24 percent, up from 1.23 percent in the fourth quarter.
- see this release
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