Following mixed third-quarter results from most of its nationwide competitors, Verizon Wireless put a stronger lock on its title as the country’s largest wireless carrier with customer growth nearly double its nearest rival and year-over-year improvements in nearly every operating and financial metric.
During the third quarter, which many analysts are noting will be the last quarter without a direct influence from the impending wireless local number portability mandate, Verizon Wireless posted a company record 1.4 million net subscriber additions, including 1.3 million retail customers additions. Its customer growth was a 15.9-percent improvement from the carrier’s third-quarter 2002 results and pushed its customer base to an industry-leading 36 million subscribers.
Of the four remaining nationwide carriers that have posted third-quarter results, Cingular Wireless L.L.C. led the way with 745,000 net customers, followed by Nextel Communications Inc.’s 646,000 net adds, AT&T Wireless Services Inc.’s 229,000 new subscribers and Sprint PCS’ disappointing 184,000 net customer additions.
Verizon Wireless’ strong growth was expected as management recently increased its full-year guidance from 4 million subscriber additions to 4.5 million customers. Following the 2.1 million net adds during the first half of the year, the carrier said it expected to add 2.4 million subscribers during the second half. Following three straight quarters of nearly 1 million or more subscriber additions, there is little doubt Verizon Wireless will add at least another million more customers during the fourth quarter, which usually is busiest.
Industry analysts noted Verizon Wireless posted robust customer growth without degrading its industry-leading cost structure. “It’s not like they are giving away phones or services to gain their subscribers,” said Jeffrey Hines, president of N. Moore Capital Ltd.
Verizon Wireless also posted year-over-year improvements in customer churn from 2.3 percent last year to 1.9 percent this year. While customer churn was down from the previous year, Verizon Wireless’ third-quarter churn results were up slightly from the second quarter of this year, which has been the case with most wireless operators.
The carrier’s robust operating metrics also bolstered its financial sheet with an 18.2-percent year-over-year increase in revenues from $5 billion during the third quarter of 2002 to $5.9 billion this year. Revenue growth was helped partially by a slight increase in average revenue per user to more than $50, which Verizon Wireless noted included more than a 2-percent contribution from wireless data services.
In addition, Verizon Wireless said it has signed up more than 100,000 subscribers to its recently launched Push to Talk offering. While the service has received mixed reviews from analysts due to a limited handset selection and latency issues, consumer behavior monitoring firm Compete Inc. noted the service will begin to siphon subscribers from current walkie-talkie leader Nextel once those latency issues are resolved.
Compete noted in a report that nearly two-thirds of Nextel subscribers who considered switching carriers in September evaluated Verizon Wireless, with one-third of those subscribers researching Verizon Wireless’ Push to Talk offering.
“Push-to-talk services will not be a growth driver for new entrants into the market until these carriers can produce response times that match those of Nextel’s Direct Connect offering,” explained T.J. Mahony, senior wireless analyst at Compete. “The strong interest we are observing in Verizon among Nextel subscribers, however, demonstrates that Nextel’s market position is clearly at risk once carriers improve the performance of their push-to-talk services.”
Verizon Wireless is expected to be joined by Sprint PCS and Alltel Corp. by the end of this year in offering push-to-talk solutions geared toward Nextel’s Direct Connect offering.
