Verizon Profit More Than Triples as IPhone Helps Win Users

Verizon Communications Inc. (VZ), the second-largest U.S. phone company, reported earnings that more than tripled as taxes decreased and the carrier attracted new customers after introducing Apple Inc. (AAPL)’s iPhone.

Net income rose to $1.44 billion, or 51 cents a share, New York-based Verizon said today in a statement. Analysts predicted 50 cents, the average of estimates compiled by Bloomberg. Sales were little changed at $27 billion.

Verizon is banking on the popularity of wireless-data plans to increase sales as the pool of people who don’t already own mobile phones shrinks and revenue from voice calls slows. The company sold 2.2 million iPhones since the device, which lets users surf the Web, download games and send e-mail, went on sale in February.

“They are outperforming the overall industry and Verizon does have a significant opportunity in front of them to sell additional smartphones,” said Michael Nelson, an analyst at Mizuho Securities USA Inc. in New York, who rates the stock “outperform” and doesn’t own it. “They certainly increased market share during the quarter.”

Verizon won 906,000 wireless contract customers in the quarter. Analysts on average projected 998,000, according to Jonathan Chaplin, an analyst at Credit Suisse AG in New York. Dallas-based AT&T Inc. (T), the largest U.S. phone company, yesterday said it added 62,000 such users last quarter.

Wireline

Verizon gaining the iPhone ended AT&T’s four-year U.S. exclusivity for the device. The next Apple phone for Verizon’s network will work worldwide, Chief Financial Officer Fran Shammo said in a conference call today.

Verizon fell 88 cents to $36.91 in New York Stock Exchange composite trading at 4 p.m. It has added 3.2 percent this year. Investors may have used the earnings report as an opportunity to sell the shares after recent gains, Nelson said.

“The stock has had a very strong runup. The stock has outpaced both AT&T and the broader market over the last several months,” Nelson said. “The report itself wasn’t a blowout.”

Outside the wireless business, Verizon is combating the industrywide drop in demand for older, wired phone connections by offering new products on its FiOS fiber-optic Internet and TV service. The company added programming from ESPN and MTV during the quarter and is working on ways to integrate mobile devices with wired services.

FiOS added 207,000 Web subscribers and 192,000 video users in the quarter. Sales from the wireline business, which includes FiOS and the declining home-phone line business, fell 2.2 percent to $10.1 billion. That missed the $10.3 billion estimate by Wells Fargo Securities LLC analyst Jennifer Fritzsche.

Faster Network

A year ago, Verizon reported earnings, excluding some costs, of 48 cents a share. Net income a year earlier was $443 million, or 16 cents a share. The amount of money the company set aside for income taxes last quarter fell by more than $1 billion to $617 million.

Average monthly bills for wireless contract customers increased 2.2 percent from a year earlier to $53.52, “a hair light” compared with analysts’ average estimate, Chaplin said in a note today. The data portion rose 17 percent to $20.51, Verizon said. Bills in the fourth quarter averaged $53.50. Verizon is investing in a so-called fourth-generation network technology called long-term evolution to make its wireless service, which accounts for more than half of revenue, more appealing. LTE gives users wireless Internet speeds more like a home broadband connection, allowing more advanced video and data sharing features.

ThunderBolt

The company put the service on sale in some markets in December and released its first smartphone for the network -- an HTC Corp. device running on the Android operating system, called the ThunderBolt -- in March. Verizon said it sold more than 500,000 4G devices in less than a month last quarter, including 260,000 ThunderBolts.

Verizon co-owns its wireless business with Vodafone Group Plc. (VOD) Shammo said that the wireless unit is still expected to begin paying a dividend to its parent companies in 2012.

To contact the reporters on this story: Amy Thomson in New York at athomson6@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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