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Verizon Wireless Roars Ahead

It adds 1.9 million net users in the third quarter.
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Verizon

(VZ) - Get Verizon Communications Inc. Report

beat third-quarter targets as its Verizon Wireless unit continued to roll up new users at a rapid clip.

The New York telco made $1.8 billion, or 62 cents a share, from continuing operations for the quarter ended Sept. 30, compared with the year-ago $1.79 billion, or 65 cents a share. Excluding certain items, earnings rose to 68 cents from 66 cents a year earlier.

Revenue rose to $23.25 billion from $18.49 billion a year earlier.

Analysts surveyed by Thomson Financial were looking for a 66-cent profit on sales of $23 billion.

"Verizon continues to win customers and market share for wireless, broadband and enterprise services," said CEO Ivan Seidenberg. "These organic growth initiatives gained momentum in the third quarter, and we are confident this growth is sustainable. We are building long-term shareholder value on a foundation of infrastructure and technology investment, supported by innovative marketing and customer service initiatives."

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At Verizon Wireless, revenue rose 18.2% from a year ago to $9.9 billion. Verizon Wireless operating income margin was 26.2% in the quarter, its highest level ever, reflecting improved efficiency.

Verizon Wireless added 1.9 million customers, which it said was the most in the U.S. wireless industry this quarter and 100,000 users ahead of targets. Churn was 1.24% over all, including 0.95% at the company's core retail postpaid business.

Verizon Telecom added 448,000 net broadband connections, giving the company a total of 6.6 million broadband users.

FiOS Internet customers accounted for 147,000 of the net broadband connection additions in the third quarter and now total 522,000. In addition, Verizon Telecom had 118,000 FiOS TV customers at the end of the third quarter.

Primary residential access lines decreased by 419,000 in the third quarter 2006, compared with the second quarter 2006, while Verizon added 539,000 residential broadband and video customers, including customers with DIRECTV bundles, over the same period.

Domestic wireline access lines dropped 7.5% from a year ago to 46 million.

On a pro-forma basis, wireline operating revenues decreased 4.7% from a year ago, driven in part by a continuation of the expected declines in former MCI operations serving mass market (residential and small business) customers. Wireline revenues were up sequentially for the second quarter in a row, with third quarter 2006 revenues up 0.1%.

Verizon said it expects to cut by $7 billion through the spinoff of its Idearc phone directories business. Verizon is also expected to receive $2 billion in cash proceeds from additional borrowings by Idearc in connection with the spinoff.