Verizon Wireless did well, adding 1.6 million net new
subscribers for the quarter, on pace with the first two quarters of the
year. AT&T Inc., which offers the iPhone in an exclusive deal,
added two million subscribers, but likely made its gains at another
carrier's expense.
"We have seen minimal impact from the iPhone thus far,"
Verizon President and Chief Operating Officer Dennis Strigl told
analysts Monday during a conference call.
Verizon had outpaced AT&T in the first half of the
year. The third quarter represented the first time AT&T had beaten it
since the end of last year.
Mr. Strigl noted that the iPhone caused a jump in
movement in the two to three weeks after it debuted in late June, and
when a price cut went into effect in September, but that rate of
customer cancellation hadn't changed materially.
While Verizon may not acknowledge it, the iPhone has
changed the way the company operates. In early October, Verizon unveiled
its lineup of marquee holiday phones early in an effort to drum up buzz.
Mr. Strigl considers one phone, a foldout device with a large touch
screen called Voyager by LG Electronics Inc., a "close competitor" to
the iPhone.
Verizon, the second-largest U.S. telephone company
behind AT&T, reported net income of $1.3 billion, or 44 cents a share,
compared with $1.9 billion, or 53 cents a share, a year earlier. Results
included 19 cents a share in special items related to international
taxes, a spinoff of access lines and MCI merger costs. Year-earlier
results included $377 million in earnings from discontinued operations.
Revenue rose 5.8% to $23.8 billion.
"Verizon met or beat financial expectations on positive
wireline margin comparisons and strong wireless performance," Bank of
America analyst David Barden said in a note.
Of note was the weakness in Verizon's high-speed
Internet access growth. Given the expansion of FiOS Internet service, it
appears as if DSL growth has all but stopped, said Buckingham Research
Group analyst Qaisar Hasan in a note.
Total broadband net additions were at 285,000, down 36%
from a year ago and below Wall Street's average estimate of 360,000.
Mr. Strigl noted that the weaker broadband number was
partially because of some DSL customers moving over to FiOS, and
insisted that overall broadband penetration and growth was doing well.
FiOS, meanwhile, appears to be making progress. Verizon
added 202,000 TV customers and 229,000 Internet customers in the period.
"In virtually all of our regional markets, we achieved
double-digit (percentage) FiOS TV penetration," said Verizon Chief
Financial Officer Doreen Tobin during the analysts' call, adding that
average revenue per user has risen steadily to industry levels.
In comparison, Philadelphia-based Comcast Corp.,
which has a larger market to address, added 489,000 new digital cable
subscribers in the quarter.
Verizon is spending heavily to roll out the new FiOS
service. The company has said it costs $842 to connect a home with FiOS,
and that doesn't include Verizon's huge marketing budget for the
program. Verizon also has to pay more to buy programming from TV
networks than cable operators. In total, Verizon is investing $18
billion to upgrade much of its network with fiber-optic lines.
Verizon Business, formed by the merger of its business
unit and MCI in January 2006, saw revenue rise 2.2% to $5.3 billion.
--Kathy Shwiff contributed to this article.
Write to Roger Cheng at
roger.cheng@dowjones.com5
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