Mobile Data Fuels Verizon in Q3

Mobile data services at Verizon Wireless pumped up third-quarter revenues and profits for Verizon Communications Inc. (NYSE: VZ), the operator announced today.

But Verizon also said that it would not be immune to the general economic uncertainty and expected consumers and business to spend less in the next quarter.

Verizon's third-quarter revenues were up 4.1 percent to $24.8 billion, compared with the same period last year. Net income was up 31.3 percent year-on-year to $1.7 billion. And Verizon reported earnings per share of 59 cents, which is up 34.1 percent compared with 44 cents in the same quarter last year.

Verizon Wireless's contribution was $12.7 billion in revenues, a 12.5 percent increase compared with the same quarter last year. The operator posted operating income of $3.5 billion, up 13.5 percent from last year, and an earnings before interest, taxes, depreciation, and amortization (EBITDA) margin on service revenues of 44.2 percent.

Mobile data is the big growth driver for Verizon. Data revenues were up 42.5 percent in the third quarter to $2.8 billion, now accounting for 25.5 percent of wireless service revenues. The operator says two thirds of the growth in wireless data revenues comes from non-messaging services, driven by laptop cards and applications like email on smartphones.

More than 60 percent of its retail wireless customers -- that is, 43.2 million -- had 3G-capable devices at the end of the quarter.

"There was clearly tough competition [in wireless] this quarter, but our business model has not been challenged," said Dennis Strigl, Verizon president and COO.

In the wireline business, Verizon's FiOS service grew steadily. The operator added 233,000 net FiOS TV customers, compared to 176,000 in the second quarter this year. Verizon now has 1.6 million FiOS TV customers, compared with 700,000 a year ago.

For the FiOS Internet service, the operator now has 2.2 million customers, compared with 1.3 million at the end of the third quarter last year. Verizon added 225,000 FiOS Internet customers in the quarter, compared with 187,000 in the second quarter this year.

But the operator signaled that the fourth quarter might be a downer, given the current economy.

"The general consensus is that for the Christmas season, consumer spending is likely to be lighter and business spending will be somewhat curtailed until next year," said CEO Ivan Seidenberg on the call with analysts today.

— Michelle Donegan, European Editor, Unstrung

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