- Revenue: $23.8 billion (up 5.8% y/y, beat 23.67B Street consensus)
- Operating Income: $4.2 billion (up 19% y/y)
- Net Income: $1.3 billion (down 33.9% y/y)
- Diluted EPS: 44 cents (down 33.3% y/y)
- Adjusted EPS: 63 cents (beat 62 cents Street consensus by a penny)
- Capex: $4.3 billion
- Wireless net subscriber additions: 1.6 million (down 14% y/y)
- Wireless total subscribers: 63.7 million (up 12.3% y/y)
- FiOS TV net adds: 202,000 (717,000 total, beating our estimate)
- FiOS Internet net adds: 229,000 (1.3 million total)
- Verizon Wireless is still growing strong and the iPhone didn’t cause an implosion. While AT&T added more customers overall last quarter thanks to the iPhone’s launch buzz, VZW still added 1.7 million net new “retail post-paid” subscribers, their most important segment. (Customers who sign long-term contracts and pay a monthly subscriber bill.)
- Subscribers are spending a lot more money on mobile data. VZW retail customers spent an average $10.59 on data services each month last quarter, up 43% from $7.41 during 3Q06. Mobile data is a crucial growth area as subscribers spend less money on phone calls. Key factor: More than 50% of customers have “broadband” capable devices (3G), which provide faster Web access, more multimedia features, etc. Concern: Messaging (mostly text) still about half of mobile data revenue. As phones get smarter, people are going to figure out better ways to send short messages for free, without using SMS service. (But as long as those subscribers are on all-you-can-eat Web/data plans, the carrier still wins.)
- Business customers are a big part of Verizon’s mobile data story. 35% of retail mobile data revenue comes from business uses like laptop cards and wireless email. This is a smart focus for Verizon as more companies outfit their employees with data cards and BlackBerry devices/smartphones. And if Verizon can maintain its reputation as a go-to carrier for businesses, it can further reduce AT&T’s consumer-driven iPhone impact.
- As we said last week for AT&T, Telco TV is alive. More than 200,000 people signed up for Verizon’s fibre-optic “FiOS” TV last quarter, bringing the total up to 717,000. (Meanwhile, cable giant Comcast posted a net loss of TV customers last quarter.) Verizon management says being able to offer a “triple-play” bundle of digital TV/high-speed Internet/phone service has helped retain customers. After making TV available in Rhode Island — where VZ was losing about 10% of its customers every year — the company is now gaining customers.
Live conference call notes after the jump.
- 8:37 Wireless: 1.8 million retail net adds, almost all post-paid
- 8:38 Retail churn 1.2%, Retail postpaid churn 0.96%
- 8:38 Retail service $52.17 up almost $1 y/y
- 8:39 Data revenue now more than 20% of total service revenue and nearly 60% of growth
- 8:39 $10.59 retail data ARPU, more than 35% from business applications driven by laptop cards and email
- 8:39 Messaging about half, up 58%
- 8:39 36 billion text messages
- 8:41 15% TV penetration, and more than 30% in one region
- 8:42 Demonstrated new symmetrical 20 mbps broadband offering recently
- 8:44 Improved line retention in FiOS TV areas: Now gaining access lines in Rhode Island vs. 10% annual loss before FiOS availability
- 8:45 Adding wireless for “quadruple play”
- 8:48 Data now 38% of all wireline revenue
- 8:50 Q&A.
- 8:51 Wireline margins up but not satisfied. Confident will see continued improvement. FiOS metrics on target to be EBITDA positive in 2008.
- 8:54 25% of access lines in multi-dwelling units, have opened 400,000. Looking for strong result in ’08.
- 8:55 iPhone: Minimal impact thus far, initial jump in port-out rates, back to normal after 2-3 weeks. Same trend after price cut. But not appreciably different churn. No major impact on our business.
- 8:56 Aggressive mobile phone product rollout in Q4. Voyager “close” competitor to iPhone. (Pretty cool, actually.) Not overly concerned about iPhone’s impact.
- 8:59 Rolling out FiOS as fast as we can. Major urban markets to add in 24-48 months.
- 9:01 “Healthy” growth in broadband. Broadband subs up 21% y/y. Adding 3600 FiOS Internet subs a day. FiOS Internet (not TV) now covers about 20% of households in footprint, up 35% YTD.
- 9:03 Yes: FiOS taking subs from cable.
- 9:04 Higher handset costs driving wireless costs up in Q3, expected to continue in Q4.
- 9:05 Wireless data: About 50% of retail subs currently have “broadband-capable” device, new apps in market. 35% of retail data revs from business applications. Messaging revenues continue strong growth, 50%-60% growth. More than half retail customers now data users. Data revenue could hit “30% range” of overall revenue. 35% “possible” in long-term.
- 9:09 Verizon/Google meeting/partnership? “We meet with lots of companies.” No other comments.
- 9:11 Expecting $900 million in synergies from Verizon Business (ex- MCI)… about one more year to go to be “where we need to be.”
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