Verizon's Earnings Jump, But Policies Draw Ire

Apr 18, 2013 (07:04 AM EDT)

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Verizon Communications reported its first-quarter earnings Thursday, and revealed that its wireless business is moving forward like gangbusters. Verizon Wireless, which is a joint venture between Verizon Communications and Vodafone, reported impressive customer growth of 720,000 net additions during the first quarter of 2013. Verizon activated 7.2 million smartphones, 4 million of which were Apple iPhones. Half of the iPhones activated were the LTE-capable iPhone 5.

At the end of the first quarter, smartphones accounted for more than 61% of Verizon Wireless' postpaid customer phone base, which is up from 58% at the end of the fourth quarter of 2012.

Verizon continues to migrate customers to its LTE network, and much of the company's quarterly success was based on its 4G service. For example, Verizon activated 5.9 million LTE devices in the first quarter. Its total number of LTE subscribers has reached 26.3 million, which represents 28% of its post-paid subscribers. Further, Verizon's LTE 4G network has expanded to 491 markets around the country, which blankets 287 million Americans with LTE. Verizon's LTE footprint has reached 95% of its existing 3G footprint, and will be complete by this summer.

[ Verizon recently won a consumer survey. Read Wireless Carrier Rankings: AT&T Vs. Verizon. ]

Revenue generated by just the wireless business reached $19.5 billion during the first quarter, up 6.8% year-over-year. Verizon Communications, wireless and landline businesses together, enjoyed net earnings of $6.2 billion, up 19.8% compared to the year-ago period.

"Verizon is firing on all cylinders," said Roger Entner, lead analyst and founder of Recon Analytics. "In an increasingly saturated market, the company is accelerating subscriber, revenue and profit growth. The ShareEverything plan is being received enthusiastically by consumers. FiOS [Verizon's bundled Internet, telephone, and television service] continues to make inroads in the Internet and video markets taking away share from the cable companies."

But not everyone is happy about Verizon's success.

Nearly 90,000 people have signed a petition started at requesting that Verizon Wireless drop its two-year smartphone contract model.

"Getting rid of carrier contracts is a win for customers," wrote petition author Mike Beauchamp. "Verizon's CEO, Lowell McAdam, has already expressed his willingness to do away with them if consumers speak loud enough about it. So here's your chance: sign this petition to tell Verizon to end carrier contracts and create an affordable way for consumers to purchase their devices." Beauchamp points to the no-contract model recently adopted by T-Mobile USA. The nation's fourth-largest carrier no longer requires contracts.

Verizon has yet to respond in any official capacity to Beauchamp's petition, but it recently enacted a new policy that's headed in the opposite direction.

Verizon now requires all customers to wait a full two years between device upgrades. Previously, customers on contract could enjoy discounted device pricing after completing 20 months of their 24-month contract. The new policy means Verizon gets to rake in an extra four months of cash for that particular contract before the customer re-signs to get a lowered device price. Verizon points out that customers can buy new gear any time they want to -- as long as they don't mind paying full price. Full-price smartphones often cost more than $600.

Verizon on Thursday fielded a lot of cranky questions during its earnings call about the new policy. It remained steadfast in its decision. With policies such as this in place, it's no wonder Verizon earns so much money.

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