VZW: Who needs the iPhone?

Verizon Wireless may not have had the iPhone, but it managed to pull off an impressive quarter in terms of subscriber additions. The operator added 1.5 million new post-paid subscribers, while prepaid, wholesale and acquisitions chipped in another 600,000. And like AT&T, much of VZW’s growth was in the high-end smartphone line, where data revenues and high-dollar contracts helped boost average revenue per user.

While AT&T launched a single iconic device, the iPhone 3G, which sold more than 2.4 million units in three months, Verizon Wireless spread the wealth around among several devices. In total, though, smartphones accounted for 30% of all devices sold last quarter, said Doreen Tobin, chief financial officer, on Verizon’s earnings call. “There’s plenty of momentum and upside here to increase penetration,” she added.

Increased smartphone sales also are leading to higher data ARPU. Year-over-year, third-quarter data revenues increased 42.5% — just under AT&T’s 50.5% increase. Verizon, however, is still slightly ahead of AT&T in its data strategy, with data accounting for 25.5% of its total service revenues as opposed to 24.2% from AT&T. AT&T was much further behind Sprint and VZW in launching its 3G data network, but as most data revenues for the last few years came from low-bandwidth messaging and e-mail services, AT&T was able to keep pace behind its competitors. Now that Internet browsing and broadband access services are starting to take hold among consumers, data revenues are surging. Two-thirds of VZW’s data growth is coming from non-messaging services.

VZW’s churn rate veered upwards from 1.12% to 1.33% in the third quarter, after three quarters of consecutive improvement. Denny Strigl, president and chief operating officer for Verizon, acknowledged that bump in churn was due to the iPhone — AT&T claimed 1 million new subscribers in the second quarter from the iPhone alone — but he pointed out that VZW has the best churn rate in the industry. The iPhone’s success in Q3 doesn’t have Verizon worried, though, and it has no plans to change its business model in reaction to it, Strigl said.