Verizon Wireless continued its run of strong quarterly results, boosting its service revenues by double-digits and squeezing its churn rate below 1.2 percent.
The company’s results “just [keep] getting better,” said Albert Lin of American Technology Research, noting that Verizon Wireless had an industry-low churn rate of 1.18 percent and strong net customer additions of 1.7 million subscribers.
Verizon Wireless’ customer adds were up about 3 percent compared with 2005’s first quarter. The carrier reported that more than 1.6 million of those new customers were retail net additions, which includes both prepaid and postpaid plans. Verizon Wireless does not break out prepaid vs. postpaid subscribers.
The nation’s No. 2 carrier had a record with its postpaid customer churn as well, at just 0.92 percent, and ended the quarter with 53 million subscribers.
In contrast, No. 1 Cingular Wireless L.L.C. posted a customer growth rate of 20 percent during the first quarter boosted by an overall churn rate of 1.9 percent. Cingular also landed 1.7 million net customer additions for the first quarter.
Verizon Wireless managed to slow average revenue per user degradation; ARPU was at $48.67, down less than 1 percent from $49.03 in the first quarter of last year. Data made up 11.5 percent of service revenues, and data ARPU grew almost 80 percent from the same period in 2005. According to Verizon Wireless, the company had 26.1 million data customers and 6.2 million customers with CDMA 2000 1x EV-DO capable devices at the end of the first quarter.
“We’re really just at the beginning of the wireless broadband revolution,” said Doreen Toben, Verizon Communications Inc.’s chief financial officer.
Wireless service revenues overall were up 16 percent to $7.6 billion.
“Our financial performance in the first quarter was on target, and we are focused on driving revenue growth in each of our business segments,” said Ivan Seidenberg, chairman and chief executive officer of Verizon Communications. “We expect Verizon Wireless and our wireline segment … to lead the industry, not necessarily in size but in profitable growth.
“Verizon Wireless is already there, and this quarter it has once again enhanced its position,” Seidenberg added.
Asked about Verizon Wireless’ appetite for prepaid during a call with analysts, Seidenberg said that Verizon Wireless has “an extraordinarily powerful engine to attract high-quality customers on the retail post-pay, and we see no reason why we shouldn’t continue to do that and we don’t want to lose our focus on that.”
He also spoke of Verizon Wireless’ “fairly aggressive projects going on within the reseller market with Amp’d [Mobile Inc.] … so I think we’re looking at that, but I just think they have to be careful what Kool-Aid we’re drinking here.”
Verizon Wireless said that about 59,000 of its customer additions last quarter were through resellers. Cingular had 632,000 new customers through resellers, and Sprint Nextel Corp. reported that of the 1.3 million customers it added in the first quarter, about 273,000 were through resellers and its remaining affiliates.
Seidenberg acknowledged that Verizon still is interested in purchasing the 45-percent stake in Verizon Wireless that is owned by Vodafone Group plc. However, he reiterated previous remarks that the decision is more Vodafone’s now than Verizon’s.
“Vodafone is fully aware of our views of this and fully aware of how we think about this particular issue,” Seidenberg said. “There’s no new news to report. The decision is really more in their court at this point.”
According to a Bear Sterns report on Verizon, Vodafone can exercise a put right that would require Verizon Wireless to buy out Vodafone’s shares at market value in July 2006 or July 2007, but the aggregate amount Verizon Wireless must pay may not exceed $20 billion and “no single exercise of the right may be for an amount in excess of $10 billion.”
