Verizon Continues to Win Wireless Subscribers -- Update

By Austen Hufford Features Dow Jones Newswires

Verizon Communications Inc. gained wireless subscribers in the latest quarter, as the telecommunications company worked to shore up its largest unit in light of its weakening television business.

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Verizon reported a net increase of 603,000 retail postpaid connections in its third quarter, including 274,000 phone subscribers. The company had 115.3 million total wireless retail connections, up from 113.7 million the same quarter last year and 114.5 million in the second quarter.

The company's revenue beat Wall Street expectations while meeting analysts' estimates on profit.

Verizon shares rose 2.3% in premarket trading Thursday.

Earlier this year, Verizon, the nation's largest wireless carrier by subscribers, unexpectedly brought back its unlimited wireless plans for the first time since 2011. The unlimited plans allow customers pay a flat rate for nearly unlimited monthly internet usage on their smartphones.

In its latest quarter, the company continued to increase the percentage of its total subscriber base that were on smartphones and using high-speed wireless internet.

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Revenue from the wireless business, Verizon's largest, fell 2.4% to $21.58 billion, as the switch to unlimited plans continued to weigh on service revenue. Still, the company said service revenue trends were improving and had increased from the second quarter.

Revenue at the wireline segment that includes its Fios service grew 1.1% to $7.66 billion, boosted by its acquisition of XO Communications.

Analysts are closely awaiting the release of Apple Inc.'s latest phones, including the premium iPhone X. If popular, the new phones could drive more customers to upgrade at Verizon but rivals could also grab customers away with discounts. Still, promotions around the latest iPhone have been softer than in previous years.

Verizon cited ongoing consumer shifts to over-the-top video options and away from traditional television as the reason for losing 18,000 Fios video customers in the quarter. That is more that the loss of 15,000 in the second quarter and 13,000 in the first quarter. It gained 36,000 in the third quarter last year.

In all, Verizon profit was the same as the third quarter last year, with net income of $3.62 billion, or 89 cents a share.

Revenue grew 2.5% to $31.72 billion. Still, excluding acquisitions and divestitures, adjusted revenue fell 2.3%.

On an adjusted-basis, earnings per share was 98 cents.

Analysts polled by Thomson Reuters expected adjusted per-share profit of 98 cents on $31.45 billion in revenue.

As a mature business in a saturated market, Verizon is increasingly looking to increase profits through spending cuts.

Verizon Chief Executive Lowell McAdam said in September that the company is aiming to cut $10 billion in costs over the next four years by moving to zero-base budgeting.

Verizon expects capital spending for 2017 to be at the lower end of its $16.8 billion to $17.5 billion range.

During the quarter Verizon, which is the new parent company of Yahoo, said that a massive data breach at Yahoo in 2013 was far more extensive than previously disclosed, affecting all of its 3 billion user accounts.

Verizon also announced that it would shut the groundbreaking and once-popular AOL instant messenger service later this year. On Thursday, the company said the integration of AOL and Yahoo is ahead of internal expectations.

Write to Austen Hufford at austen.hufford@wsj.com

Boring is good when you're the largest wireless carrier in the country.

Buoyed by soft promotions around the latest iPhone, Verizon Communications Inc. boosted revenue and its subscriber rolls in the third quarter, a sign the carrier's return to unlimited data plans earlier this year has staunched customer defections.

Verizon added 603,000 monthly postpaid connections in the quarter, nearly double what Wall Street expected. The company had 115.3 million total wireless retail connections, up from 113.7 million the same quarter last year and 114.5 million in the second quarter.

Verizon shares rose 2.2% to $49.73 in midday trading Thursday but are down about 7% on the year.

After losing customers during the first three months of the year, Verizon in February brought back unlimited wireless plans for the first time since 2011. The unlimited plans allow customers pay a flat rate for nearly unlimited monthly internet usage on their smartphones.

The move exacerbated revenue declines in Verizon's wireless unit, as many customers on older, more expensive plans quickly switched over to the cheaper unlimited option. That trend is slowing as customers on plans with data caps are now starting to pay up for unlimited data, the company said. While revenue from the wireless business, its largest unit, fell 2.4% to $21.58 billion, the company said the declines were bottoming out.

"We knew initially we would see optimizers who had the opportunity to move to unlimited and save money," said Verizon finance chief Matt Ellis on a call Thursday with analysts. Wireless-service revenue increased sequentially for the first time in three years.

Verizon's subscriber metrics also benefited from weaker promotions around Apple Inc.'s latest iPhone. But heavier competition could arrive during the last three months of the year, analysts warned, as the flagship iPhone X goes on sale in November, just in time for the holiday season.

Verizon said wearable devices, such as watches, made up a significant portion of its 238,000 connected device additions in the quarter -- an indication that Apple's new LTE connected smartwatch is off to a decent start.

Revenue at the wireline segment that includes its Fios internet and television service increased 1.1% to $7.66 billion, boosted by its acquisition of XO Communications, which owned fiber-optic networks.

Verizon cited ongoing consumer shifts to over-the-top video options and away from traditional television as the reason for losing 18,000 Fios video customers in the quarter. That is more that the loss of 15,000 in the second quarter and 13,000 in the first quarter. It gained 36,000 in the third quarter last year. It ended the quarter with 4.6 million Fios video customers.

In all, Verizon profit was the same as the third quarter last year, with net income of $3.62 billion, or 89 cents a share. Revenue rose 2.5% to $31.72 billion. Still, excluding acquisitions and divestitures, adjusted revenue fell 2.3%.

Verizon expects capital spending for 2017 to be at the lower end of its $16.8 billion to $17.5 billion range.

Write to Austen Hufford at austen.hufford@wsj.com and Ryan Knutson at ryan.knutson@wsj.com

(END) Dow Jones Newswires

October 19, 2017 12:34 ET (16:34 GMT)