October 18, 2012 / 10:05 AM / 8 years ago

Verizon third-quarter profit rises, boosted by wireless unit

(Reuters) - U.S. telecommunications group Verizon Communications Inc posted a 16 percent increase in quarterly profit, helped by higher revenue in its wireless business after it raised data prices and started selling the latest Apple iPhone.

A sign of Verizon Wireless is seen at its store in Westminster, Colorado April 26, 2009. REUTERS/Rick Wilking

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.

Verizon Wireless, like rivals AT&T Inc and Sprint Nextel Corp, 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 profit.

“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.

Macquarie Capital analyst Kevin Smithen said in a note that Verizon was “the undisputed champion of US wireless and perhaps global wireless.”

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 billion.

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 network.

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 sold worldwide this year will be smartphones. Between 20 percent and 25 percent of people in the world already own smartphones, with the penetration rate rising to 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. (Reporting by Sakthi Prasad and Neha Alawadhi in Bangalore, Nicola Leske in New York; Editing by Hans-Juergen Peters, Mark Potter and Jeffrey Benkoe)

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