Data still driving Verizon Wireless growth

Verizon Wireless added 1.6 million subscribers in the third quarter but, more impressively, saw its average revenue per user (ARPU) climb, driven by greater data usage.

Verizon Communications and Vodafone’s CDMA joint venture increased its subscriber base to 63.7 million, just 2 million shy of AT&T, which itself reported subscriber gains of 2 million last week. Verizon Wireless increased its monthly ARPU for retail customers by 1.9% year-over-year to $52.17, its highest level ever. That nearly $1 surge, however, was not from additional voice revenue per subscriber. In fact, falling voice revenue was offset by more than $3 of average voice revenue per customer per month. Third-quarter data ARPU rose 42.9% year-over-year to $10.59 a month.

AT&T posted similar gains last quarter with overall ARPU up 2% and data ARPU up 64% year-over-year, but AT&T also had an added boost from the iPhone. Apple reported having sold 1.1 million iPhones in the last quarter. Though a good portion of iPhones have been “hacked” to allow for their use off AT&T’s network, AT&T has the sole rights to sell the iPhone currently, meaning the vast majority of those customers signed up for new voice and data plans with the operator. Each iPhone user is required to buy a $20 a month data plan. AT&T also reported that 40% of new iPhone users on its network came from other networks. (See today’s related story on the iPhone.)

Verizon, however, said the iPhone had no overall impact on its sales for the quarter. Its churn rate stayed flat, increasing only slightly from 1.24% to 1.27%. Verizon Communications President and Chief Operating Officer Denny Strigl said the company saw a bump in number portability requests—signaling customers moving to another provider—when the iPhone first launched over the summer.

“After two to three weeks, it was back to normal,” Strigl said at Verizon’s earnings call today. “We saw the same thing occur when the price was lowered on iPhone. I think you can see from our churn numbers there’s not an appreciable difference from what you’ve seen in other quarters. Relative to the iPhone, we don’t see a major impact on our business.”

Strigl added that Verizon expects the new EV-DO LG Voyager to be a competitive device to the iPhone, boasting faster Web access than the EDGE-limited Apple device. But even without an “iPhone killer” on the market last quarter, he said, Verizon Wireless’ data services have done plenty well on their own. Half of Verizon Wireless subscribers today have EV-DO capable phones in their hands even if they don’t subscribe to a data service plan (analysts estimate AT&T has only 11% penetration of UMTS phones), Strigl said. And the core service revenue from data is starting to shift away from mere text messaging to more advanced data services, he said.

“We're seeing new applications coming into the market,” Strigl said. “We'll see customers increasingly use those applications. We’re seeing now about 35% of retail data revenues coming from business applications, up significantly from the prior year…About 68% of retail customers are now data users. Where do we go long term? Eventually we may hit the 30% range [of revenues accounting for data]. Our wireless team continues to be focused on wireless data.”