Wednesday, April 18, 2012

Verizon Reaches 47% Smartphone Penetration, LTE at 9% of Post Paid Base

Driven by a 7.7% increase in wireless service revenues and continued gains in FiOS, Verizon Communications reported double-digit percentage growth in year-over-year quarterly earnings results and increased cash flow in first-quarter 2012.

"We built momentum coming out of 2011, and our results show that we continue to execute in the key growth areas of our business. Verizon Wireless produced both great growth and great margins, and we produced another strong quarter of FiOS growth. We are confident we will improve Wireline margins for the full year. Our repositioning of Verizon Enterprise Solutions has better aligned our strengths in high-growth markets, and we expect our enterprise business to contribute even more to overall Wireline revenue growth and profitability over time," stated Lowell McAdam, Verizon chairman and CEO.

Some highlights:

Verizon’s total operating revenues were $28.2 billion on a consolidated basis, an increase of 4.6 percent compared with first-quarter 2011.

Diluted earnings per share (EPS) were 59 cents, compared with 51 cents per share in 1Q 2011 - a 15.7 percent increase.

Wireless CAPEX was $1.9 billion, which was lower by $850 million, or 31%, from the first quarter last year.

Wireline CAPEX was $1.5 billion, about 5% higher than the first quarter last year. This increase is due to timing, strategic spending in enterprise and some copper-to-fiber migration within the residential customer base.

Wireless Highlights

Service revenues in the quarter totaled $15.4 billion, up 7.7 percent year over year. Retail service revenues grew 8.9 percent year over year, to $14.9 billion, an increase of 110 basis points over fourth-quarter 2011 and the highest growth rate in three years.

Data revenues were $6.6 billion, up $1.1 billion - or 21.1 percent - year over year, and represent 42.9 percent of all service revenues. Total revenues were $18.3 billion, up 8.2 percent year over year.

Retail postpaid ARPU grew 3.6 percent over first-quarter 2011, to $55.43. Retail postpaid data ARPU increased to $23.80, up 16.0 percent year over year. Retail service ARPU grew 3.4 percent, to $53.66.

Wireless operating income margin was 28.6 percent. Segment EBITDA margin on service revenues (non-GAAP) was 46.3 percent.

Verizon Wireless added 734,000 retail net customers in the first quarter, including 501,000 retail postpaid net customers. These additions exclude acquisitions and adjustments.

At the end of the first quarter, the company had 93.0 million retail customers, a 5.2 percent increase year over year, including 88.0 million retail postpaid customers.

At the end of the first quarter, nearly 47 percent of Verizon Wireless’ retail postpaid customer phone base were smartphones, up from 43.5 percent at the end of fourth-quarter 2011.

There were 2.9 million 4G LTE device sales in 1Q ’12.

Verizon Wireless now has 8 million 4G LTE customer connections, representing 9% of the postpaid base. Of note, about two thirds of these are smartphones.

Retail postpaid churn was 0.96 percent, an improvement of 5 basis points year over year. Total retail churn was 1.24 percent, an improvement of 9 basis points year over year.

Verizon Wireless introduced five new 4G LTE devices in the first quarter 2012: the Droid 4 and Droid Razr Maxx by Motorola, the Spectrum and Lucid by LG, and the Samsung Galaxy Tab 7.7. In addition, the Apple iPad with Wi-Fi + 4G became available from Verizon Wireless in mid-March.

Wireline Highlights

First-quarter 2012 operating revenues were $9.9 billion, a decline of 2.0 percent compared with first-quarter 2011. Wireline operating income margin was 1.6 percent, compared with 2.8 percent in first-quarter 2011, and Segment EBITDA margin (non-GAAP) was 22.6 percent, compared with 23.6 percent in first-quarter 2011.
Consumer revenues grew 1.7 percent compared with first-quarter 2011. Consumer ARPU for wireline services was $97.88 in first-quarter 2012, up 8.1 percent compared with first-quarter 2011. ARPU for FiOS customers continued to total more than $148 in first-quarter 2012. FiOS services to consumer retail customers represented 63 percent of consumer wireline revenues in first-quarter 2012.

Global enterprise revenues totaled $3.9 billion in the quarter, up 0.9 percent compared with first-quarter 2011. Sales of strategic services – including Terremark cloud services, security and IT solutions, and strategic networking – increased 11.6 percent compared with first-quarter 2011 and represented 51 percent of global enterprise revenues in first-quarter 2012.

Verizon added 193,000 net new FiOS Internet connections and 180,000 net new FiOS Video connections in first-quarter 2012. Verizon had a total of 5.0 million FiOS Internet and 4.4 million FiOS Video connections at the end of the quarter.

FiOS penetration (subscribers as a percentage of potential subscribers) continued to increase. FiOS Internet penetration was 36.4 percent at the end of first-quarter 2012, compared with 33.1 percent at the end of first-quarter 2011. In the same periods, FiOS Video penetration was 32.3 percent, compared with 29.1 percent.

Broadband connections totaled 8.8 million at the end of first-quarter 2012, a 3.3 percent year-over-year increase. The net increase of 104,000 broadband connections from fourth-quarter 2011 was the highest quarterly net-add total since second-quarter 2009.

Verizon continued to expand its 100 Gbps network, enabling several more network routes in the U.S. and two additional routes in Europe.

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