Verizon Wireless released strong second quarter financial results last week setting expectations for what its rivals will need to shoot for. Obviously, those competing results are already fixed and just need to be unleashed on a rabid financial community beginning this week, but the bar has now been set at a level that all others will be judged.
In addition to the usual financial numbers, Verizon Wireless provided some more insight and analysis into those numbers during its conference call with investors. Perhaps the most touted insight was talk from Verizon Wireless’ management, which is also predominately management at majority owner Verizon Communications, which noted the carrier was bracing for the impact of a new iPhone in the fourth quarter. This bit of news set the Internet alight with some sort of date consumers can expect to begin camping out in order to get their hands on the latest iPhone device, which is expected to be fortified with support for LTE services.
Ahead of that planned launch, Verizon Wireless’ management noted that it would not be surprised to see a slowdown in iPhone, or for that matter all smartphone sales, during the current third quarter as consumers start saving their pennies for the latest Apple product. The carrier experienced a similar phenomenon last year ahead of the launch of the current generation iPhone 4GS.
A report released today by ChangeWave Research found that consumer demand for the next iPhone is running ahead of that seen for the last device, which could spell financial trouble for carriers having to absord the financial burden of subsidizing those device sales.
As for the iPhone’s impact during the recently concluded second quarter, Verizon Wireless seemed to go out of its way to show that its growth is not a one-trick (iPhone) pony, reporting that it sold 2.9 million smartphones running the Android operating system during the quarter, compared with 2.7 million iPhones. Verizon Wireless did note that 25% of iPhone sales, or roughly 675,000 devices, were sold to new customers to the carrier, which was a slightly ahead of the 500,000 LTE-equipped smartphones that were sold to new customers, signaling that the iPhone is still a significant draw for new customers.
Other highlights:
–Verizon Wireless noted that overall costs were helped by a 23% decrease in capital expenditures for the quarter, down to $2 billion. The carrier noted that the results were due to increased spending last year targeting its legacy CDMA-based 3G network in line with the launch of Apple’s iPhone across that network.
–While postpaid services still make up a dominating majority of the carrier’s direct business, prepaid growth saw substantial traction during the quarter. However, the carrier’s management noted that more than half of its prepaid net additions for the quarter were customers purchasing tablet devices, which traditionally have slightly lower revenues than smartphones and basic devices as consumers typically restrict tablet usage to just data services, and only then when outside of “free” hot spot locations.
The carrier could be looking to increase stickiness of its tablet offerings through its recently rolled out Share Everything plans that allow customers to share data access among their mobile devices. For tablet owners, they can tap into the plan for just $10 per month, which could be an appealing price point.
–Despite a vocal minority of complaints flooding Internet message boards, Verizon Wireless claims that it has seen positive feedback from customers selecting its Share Everything plans. However, the carrier did note that it did not expect to see any revenue impact from the new rate plans through the end of the year, though it does expect to see the growth trend from the first half of the year to continue.
–Verizon Wireless’ management also noted that it remains on track to carve out $2 billion in cost savings. The carrier noted that it continues to cut spending on its legacy CDMA network, which is helping to drive cash flow for its operations. This is likely to increase moving forward as most expect the next iPhone iteration to launch later this year to include LTE capabilities.
Verizon Wireless is also in the midst of shuttering some domestic call centers that could help the carrier’s bottom line.
–Verizon Wireless noted that there were no plans currently on the table for a further dividend payment to its parent companies Verizon Communication or Vodafone. The carrier last year paid out a one-time $10 billion payment to its parents.
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