Third-party remains growth driver for Verizon Wireless

Verizon Wireless (VZ) posted second quarter results that showed that while the industry’s largest carrier fell just short of the customer growth reported by rival AT&T Mobility (T), the operator did manage to add more direct customers willing to sign a contract, often viewed as the most valuable in the industry.
Verizon Wireless said it added 1.351 million customers during the quarter, which was an 18.3% jump from what it added during the same quarter of 2009, but short of the 1.562 million AT&T Mobility said it added. Verizon Wireless did note that it added 665,000 direct postpaid customers, which was well ahead of the 496,000 contract customers AT&T Mobility attracted during the quarter. A loss of direct prepaid customers during the quarter cut Verizon Wireless’ total direct customer growth to just 454,000 subscribers during the quarter.
As in previous quarters, a majority of new activations on its network were through third-party channels with Verizon Wireless reporting 896,000 customer additions through its partners. The carrier also subtracted 2.1 customers from its network during the quarter due to divestitures that resulted in a drop in total customers from 92.8 million at the end of the first quarter to 92.1 million at the mid-point of the year. The results kept Verizon Wireless about 2 million customers larger than AT&T Mobility.
Verizon Wireless also said that it added 264,000 “other connections” to its network during the quarter, including e-book readers, machine-to-machine devices and telematics devices propping up that segment to 7.7 million total connections on its network.
Customer churn dropped year-over-year from 1.37% to 1.27%, which the carrier said was its lowest in 2 years. Average revenue per user from direct customers increased nearly 1% year-over-year to $51.56 during the quarter with data services accounting for $17.85 of that total.
Wireless service revenues increased just over 5% from $13.349 billion during the second quarter of 2009 to $14.046 billion this year, with total wireless revenues up 3.4% to $16 billion for the quarter. Wireless expenses increased just 1.6% year-over-year, which pushed operating income up 8.6% to $4.842 billion.
Verizon Wireless also reported that capital expenditures surged 21% year-over-year during the quarter to $2.262 billion and that wireless capex spending topped $4 billion for the first half of the year. The carrier is in the process of building out its LTE network with plans to cover 100 million potential customers by the end of the year.
Overall, Verizon Wireless’ parent company Verizon Communications Inc. posted mixed results as flat year-over-year revenues combined with a $2.3 billion charge associated with workforce reductions resulted in the company posting loss of 7 cents per share for the quarter compared with a return of 52 cents per share in 2009. Despite the drop, Verizon’s stock was trading up more than 4% early Friday at $28.14 per share.