* Q3 EPS 56 cents versus 49 cents year ago
* Q3 revenue rises 4 pct to $29 bln
* Q3 Verizon Wireless service revenue rises 7.5 pct
* Shares up 3.6 percent
By Nicola Leske and Sakthi Prasad
Oct 18 U.S. telecommunications group Verizon
Communications Inc posted a record quarterly profit
thanks to its wireless business, even as corporate customers
delayed renewing contracts amid continued economic uncertainty
at home and abroad.
Verizon said on Thursday it was on track to meet 2012
financial goals, with capital spending for the year expected to
be lower than the $16.2 billion total in 2011.
Like rivals AT&T Inc and Sprint Nextel Corp,
Verizon Wireless is spending billions of dollars to upgrade its
network to support booming demand for services like web surfing
and video on smartphones like Apple Inc's iPhone.
Higher data usage can translate into better profits.
"Wireless achieved record profitability in a quarter in
which we reported the highest number of retail postpaid gross
and net adds in four years," Chief Executive Lowell McAdam said
in a statement, referring to new customer numbers.
For the third quarter, Verizon's profit rose to $1.59
billion, or 56 cents per share, from $1.37 billion, or 49 cents
per share, in the year-ago quarter, when the firm was hit with
costs from a two-week workers' strike and weather damage.
Revenue increased to $29.01 billion from $27.91 billion in
the year-ago quarter. Analysts, on average, expected revenue of
$28.96 billion, according to Thomson Reuters I/B/E/S.
Excluding unusual items, the company earned 64 cents per
share, in line with expectations.
Shares rose 3.6 percent to $46.33 near midday.
Macquarie Capital analyst Kevin Smithen said in a note that
Verizon was "the undisputed champion of US wireless and perhaps
Its Verizon Wireless venture with Vodafone Group Plc
added 1.8 million net new subscribers in the quarter, compared
with 882,000 in the year-ago third quarter.
Verizon Wireless, the No. 1 U.S. mobile provider, posted a
7.5 percent increase in quarterly service revenue to $ 16.2
IMPROVED PROFITS IN WIRELINE
Chief Financial Officer Fran Shammo did not comment on
prospects for 2013, except to say the company anticipated
improved profitability in its wireline business and that he
hoped large businesses would "renew their investing activities
Chief investment officers have been holding off on new
contracts and investment decisions, remaining cautious "with
regard to uncertainties involving the election outcome, the
pending fiscal cliff, potential tax reform and other policy
changes that may take place," Shammo said on a call with
He added that the situation in Europe was particularly
challenging for enterprise and wholesale revenues and that the
economic pressures there would also be felt in 2013.
"Unfortunately we don't see anything different than we see
today," Shammo said.
Overall, Verizon's wireline revenue declined 2.3 percent to
$9.9 billion, broadly in line with expectations. However, its
consumer wireline business grew 4.6 percent to $3.6 billion.
NEW DATA PLANS
At the end of the third quarter, smartphones constituted
more than 53 percent of the Verizon Wireless customers who are
billed monthly, up from 50 percent at the end of second quarter
of 2012, the company said.
On June 28, Verizon overhauled its price structure to allow
families and individuals to share a data allowance among
multiple devices. As part of its new plans, it raised fees for
data services like mobile web surfing while offering unlimited
calls and texts for a flat fee.
The idea of the new plans was to encourage customers to
connect more devices, including tablet computers to its cellular
As a result, Verizon Wireless now reports average revenue
per account (ARPA) instead of average revenue per user (ARPU)
since customers can share data among multiple devices.
Verizon said by the end of the quarter it had 34.8 million
accounts billed on a monthly basis, compared with 34.6 million
in the second quarter.
Average revenue per account rose 6.5 percent to $145.42 from
$143.32 in the second quarter and $136.57 in the third quarter
the year before.
About 35 percent of an estimated 1.9 billion cellphones that
are sold worldwide this year will be smartphones. Between 20
percent and 25 percent of people in the world already own
smartphones, w it h the penetration rate rising to a range of 50
percent to 55 percent in the United States, according to
research firm Gartner.
Macquarie's Smithen added that Verizon had nothing to fear
from Sprint and Japan's Softbank Corp because the two
would not be able to be disruptive until at least the second
quarter of 2014.
Sprint last week agreed to sell 70 percent of itself to
Softbank in a $20 billion transaction.
Shammo said the move by Softbank was evidence of the
strength of the U.S. market and "the growth potential that is
still available within this market."