Verizon's iPhone, LTE activations soar in Q4

For Verizon Wireless (NYSE:VZ), the fourth quarter was all about the iPhone and LTE devices.  The company activated 4.3 million Apple (NASDAQ:AAPL) iPhones and 2.3 million LTE devices in the fourth quarter of 2011, significantly higher than past quarters in 2011. However, the company also saw its capital expenditures increase for 2011.

Overall Verizon added 1.5 million net retail customers in the quarter, the highest the company had seen in three years.  That figure includes 1.2 million retail postpaid customers, an increase from 882,000 postpaid net adds in the third quarter.

During the company's quarterly earnings conference call, Verizon Communications CFO Fran Shammo said the company spent $1.8 billion on wireless capital expenditures for the quarter and $9 billion for all of 2011, up 6.3 percent from all of 2010. Shammo said Verizon will continue to migrate customers off its EV-DO network and onto LTE and expand its LTE network this year. The company expects to match LTE coverage to its CDMA network coverage by mid-year 2013, earlier than a previous expectation of the end of 2013.

Shammo also said Verizon expects the Department of Justice and FCC to complete their reviews by mid-year of Verizon's $3.9 billion purchases of AWS spectrum from Comcast, Cox Communications, Time Warner Cable and Bright House Networks. He also said the companies continue to work on their cross-marketing efforts, and that Verizon and Comcast will expand their joint marketing efforts throughout the year.

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

Verizon added 1.6 million LTE smartphones in the fourth quarter as well as 700,000 LTE data devices. Shammo said the company's fourth-quarter promotion of doubling LTE smartphone customers' data allowances drove LTE smartphone adoption. The company added 500,000 LTE devices in the first quarter, 1.2 million in the second quarter and 1.4 million in the fourth quarter.

Shammo said that he expects more changes in LTE device costs than in data plan costs in 2012. He reiterated previous comments that the company is working on family data plans, but did not give a timeframe for when Verizon will introduce the plans.

At the end of 2011 Verizon said smartphones accounted for 44 percent of the carrier's retail postpaid phone base, up from 39 percent at the end of the third quarter and up from 28 percent in the year-ago quarter. Shammo said that 78 percent of all retail postpaid phones in the quarter were smartphones.

Subscribers: Verizon added 1 million total net connections in the fourth quarter. The company reported a loss of 490,000 wholesale and other customers due to a loss of telematics customers. At the end of 2011, Verizon had 108.7 million total connections, consisting of 92.2 million retail connections and 16.5 million wholesale and other connections.

ARPU: The carrier's retail postpaid average revenue per users grew 2.5 percent, to $54.80. Retail postpaid data ARPU increased to $22.76, up 14.3 percent from the year-ago period. Retail service ARPU also grew 2.6 percent over the fourth quarter of 2010, to $53.14.

Churn: Retail postpaid churn was 0.94 percent in the fourth quarter, a slight improvement from the year-ago period. Total retail churn was 1.23 percent, also down slightly from the year-ago quarter.

Financials: Verizon's total service revenue for the quarter clocked in at $15.1 billion, up 6.4 percent from the year-ago period. Data revenues were $6.3 billion in the fourth quarter, up more than $1 billion or 19.2 percent year-over-year, and represented 41.6 percent of all service revenues.Total revenue was $18.3 billion, up 13 percent from the year-ago period. The carrier's EBITDA margin on service revenues was 42.2 percent, down from 47.8 percent int he third quarter. Shammo had warned earlier this month that Verizon's margins would decline in the quarter due to higher device subsidy costs, but said Verizon will strive to boost margins in 2012.

For more:
- see this release

Special Report: Wireless in the fourth quarter of 2011

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