Verizon Wireless set the results bar high for its rivals, announcing second quarter numbers showing continued strong growth in the lucrative postpaid space as well as increased revenues.
Verizon Wireless reported just over 1 million direct net customer additions for the quarter, including 941,000 postpaid and 97,000 prepaid customers. The direct growth was down slightly from the nearly 1.2 million direct net additions posted during the second quarter of 2012, but up sequentially from the 720,000 customers added during the first quarter of this year. The Q2 growth also pushed the carrier’s total direct customer base past the 100 million subscriber mark, with postpaid customers making up 94% of its total direct base.
Perhaps more ominous for rivals, Verizon Wireless’ management noted that the carrier “expects to continue to see increases in quarterly sequential net additions for retail postpaid connections in the second half of 2013.” Could be one of the reasons why many of its rivals are aggressively pursuing the prepaid market.
Customer churn increased year-over-year from 1.11% in 2012 to 1.23% this year, but did dip sequentially from 1.3% earlier this year. Verizon Wireless added that nearly 85% of postpaid net additions were with smartphones, and that smartphones made up just over 64% of its postpaid base at the end of the second quarter.
Those customers were also spending more money per month, as Verizon Wireless reported a 6.4% year-over-year increase in average revenue per account to $152.50, which was just ahead of expectations. That growth, along with the strong customer additions, helped boost wireless operating revenues 7.5% year-over-year to nearly $20 billion for the second quarter. A slightly smaller increase in expenses helped to increase wireless operating income more than 13% over the same time frame to just under $6.5 billion for the quarter.
Analysts were a bit surprised to see Verizon Wireless’ capital expenditures increase year-over-year from just over $2 billion during the second quarter of 2012 to nearly $2.3 billion this year. The carrier had been talking of a cut back in capex, but noted that the increase was due to the rollout of its 1.7/2.1 GHz spectrum holdings to support its LTE network. Verizon Communications, parent company of Verizon Wireless, increased its full-year guidance for capex, stating it now expects to spend up to $16.6 billion for all of 2013.
Device financing model
Verizon Wireless also jumped into the device financing fray, announcing plans to rollout its Edge offering on Aug. 25. The Edge plan will allow customers to spread out the cost of a device over a 24-month period, with customers only required to pay the first month installment upfront. After six months and with at least 50% of the device’s total price paid, customers can trade the device in for a new phone with the same payment requirements.
The offering is expected to counter a rash of similar models that have been launched by rivals this year. Verizon Wireless earlier this year had extended the upgrade timeline for customers looking to get a deal on a new device.
Verizon’s management also noted during a conference call that it was not interested in placing a counter bid to AT&T’s pending offer to acquire Leap Wireless. Analysts have noted that the AT&T offer is a play to acquire more spectrum, something Verizon Wireless has accomplished through recent deals, as well as a stronger push into the no-contract space. Verizon CFO Fran Shammo noted that Verizon Wireless would utilize its legacy 3G network to pursue the prepaid space and not look to a different branding effort as taken by AT&T Mobility with its GoPhone and Aio Wireless services.
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