Verizon Wireless continues growth surge

Verizon Wireless continued to close the subscriber gap with Cingular, announcing today that in the third quarter it had matched its previous net adds record of 1.9 million and made significant gains in critical growth areas such as data revenues.

Verizon Wireless brought in $8.35 billion in revenues for the third quarter, a 14.2% increase over its Q3 results in 2004. That resulted in a 10.5% year-over-year increase in operating income to $1.82 billion, which is divided between the venture’s two owners, Verizon Communications and the Vodafone Group.

With the 1.9 million net customer adds, Verizon Wireless is matching the momentum of previous quarters as its primary competitors Cingular Wireless and Sprint Nextel suffer from sluggish customer growth. While Verizon Wireless has added an average of 1.77 million net subscribers over the last five quarters, Sprint has seen its subscriber growth peter off leading up to and after its acquisition of Nextel Communications. And Cingular’s net adds fell below the 1 million mark last month after it achieved record gains shortly after its acquisition of AT&T Wireless last year. Verizon Wireless at the end of September had 49.3 million wireless customers, 3 million short of Cingular’s 52.3 million subscribers, while Sprint Nextel had 45.6 million subs.

While the other operators are claiming slower growth cycles due to maturing of the wireless market in the U.S., Verizon Executive Vice President and Chief Financial Officer Doreen Tobin claimed Verizon Wireless is growing at the other carriers’ expense. She said ever since local number portability was introduced in early 2004, Verizon Wireless has not only managed to maintain a balance between customers lost and gained to LNP, it has managed to take significant share away from its competitors, demonstrated by both its strong customer adds and low churn rate.

“Since the beginning of 2004, we have taken share from every carrier through LNP in every single quarter,” Tobin said.

Verizon Wireless overall Q3 service ARPU was up slightly over the second quarter’s, but it continued its fall compared to previous years. ARPU was $50.13 a month, 2.8% or $1.45 lower than ARPU over the same period last year. Like all the operators, Verizon is facing continuous revenue pressure from falling voice pricing, but the carrier made impressive progress in boosting its data revenues. Verizon Wireless posted $613 million in data revenues for the third quarter, resulting in a data ARPU of $4.23 a month, 73% higher than last year’s third quarter and 22% higher than the second quarter. While Verizon had been lagging beyond the other Tier I providers in data ARPU, last quarter’s boost put its total data revenues at 8.4% of all service revenues, indicating the massive investment in its 3G EV-DO networks is starting to pay off. Sprint’s industry-high data ARPU took a hit after it absorbed Nextel, causing its data revenues to fall from more than 10% of overall revenues to 8.8% in the third quarter. Cingular’s data revenues also grew to 8.7% of all revenues in the third quarter.

“We are really at the beginning of this significant revenue opportunity,” Tobin said. “At this point no one in the industry is better positioned to take advantage of this growth market than Verizon Wireless. Our EV-DO networks give us by far the most pervasive broadband wireless coverage of any carrier in the market place.”

Verizon Wireless has now built EV-DO service in 170 markets and 84 airports, covering a footprint of 140 million people. Verizon Wireless still doesn’t release any specific figures on the number of 3G customers using either its business or Vcast consumer services, saying it has 21.6 million active data users, but those customers range from the occasional SMS user to the broadband-enabled Vcast user. The carrier now has 15 terminals launched over the 3G network--four PDAs, four PC cards and seven handsets--as well as supports three laptops with EV-DO embedded chips. Verizon has conducted its initial lab trials of EV-DO’s next evolution Revision A, demonstrating end-to-end voice over IP. It plans to conduct live trials of the technology early next year.

Verizon Wireless had 45.7 million retail postpaid customers in Q3, representing 93% of its customer base. Its churn rate fell to 1.2% from 1.5% year-over-year.