Verizon: no iPhone, no problem

AT&T may have been able to claim 1.6 million iPhone activations in the first quarter, but Verizon still emerged the winner in the mobile data race, bolstering its data revenues through a diverse blend of devices and data plans despite recessionary pressure and the diluting effects of its Alltel acquisition.

In a first quarter where Verizon added 1.3 million new wireless subscribers and saw substantial gains in its FiOS residential fiber business, the wireless unit also managed to hold out against cost-saving trends in the market, which see customers downgrading their plans and businesses cutting their data services. Verizon emerged as the leading US operator in every key wireless data metric, including overall data revenue, average data spend per customer, and data's percentage of overall service revenue. And Verizon accomplished it without a single iconic device driving sales.

Instead Verizon's data growth was spread among a wide variety of smartphones and PDAs, said Verizon chief operating officer Denny Strigl during Verizon's first-quarter earnings call. The main area of weakness for data services came from enterprises, many of which canceled broadband PC card plans as they cut their staff and costs. In part due to those business customer losses, VZW's churn rate jumped from 1.19% to 1.47% year-over-year, but Strigl said Verizon had more success in holding onto its consumer data subscribers as well as adding new ones. Strigl said smartphones and PDAs now account for 41% of all new direct device sales, and Verizon now has 19.3 million integrated or 'smart' devices on its 3G network. Those devices bring in significant revenue: about $100 a month for a BlackBerry. Furthermore, Verizon hasn't suffered too much from economic pressures forcing subscribers to cancel or downgrade their data services, Strigl said.

"We have no evidence of customers trading down on plans or features," Strigl said. "We do have pockets of pressure due to the economy, but I would say it's more the economy than competition."
Data accounted for 27.9% of VZW's first-quarter service revenue, coming in at $3.6 billion, compared to $3 billion in the fourth quarter and $2.3 billion last year. Most of that $600 million sequential increase, however, came from data subscribers Verizon added to its rolls with its acquisition of Alltel on Jan. 9. While the merger added 8 million subscribers to Verizon's customer base—also allowing it to surpass AT&T as the largest US operator with 86.6 million subs—it also diluted Verizon's average revenue per subscriber (ARPU) both overall and for data.

Verizon's monthly service ARPU in the first quarter was $50.74, of which data accounted for $14.16. Though Verizon didn't break out separate figures for Alltel and Verizon subscribers in the first quarter, pro forma results from previous quarters (which factor in what both Alltel and Verizon's numbers for comparison's sake) show that Alltel would have lopped off about 25 cents in total ARPU and between 35 cents and 40 cents in data ARPU. That means Alltel customers on average not only ponied up less each month than the typical Verizon subscriber, they also spent considerably less on data.