Verizon Wireless subscription growth slows

The carrier sees a drop-off in new subscriptions as it struggles to compete against AT&T and its exclusive on the Apple iPhone.

Verizon Communications saw revenue slip in the third quarter of 2010 as it experienced a decline in wireless subscribers.

For the third quarter of 2010, Verizon today reported a profit of $881 million, or 31 cents a share. This was down from $1.18 billion, or 41 cents a share, during the same quarter a year earlier. Excluding certain items, such as merger and restructuring costs, earnings dropped to 56 cents per share from 60 cents and revenue declined 2.9 percent to $26.5 billion. Analysts had expected Verizon to report earnings of 54 cents on $26.3 billion in revenue.

Verizon's wireless business struggled to keep up with rival AT&T during the quarter. Verizon added 997,000 new wireless customers in the third quarter, compared with 1.2 million customers a year before. The company added 584,000 "postpaid" subscribers, or those who have contracts.

Meanwhile, AT&T, which announced third-quarter earnings yesterday, said it added 2.6 million new subscribers during the quarter. AT&T added 745,000 postpaid subscribers, of which about 80 percent of whom were using smartphones.

AT&T's smartphone growth was fueled by sales of the Apple iPhone. AT&T has had an exclusive deal to sell the iPhone in the U.S. since the device's launch 2007. There are rumors that Verizon will get a version of the phone starting in January.

Verizon has invested heavily in the Google Android platform, selling smartphones called Droids to compete against the iPhone. These devices, made mostly by Motorola and HTC, have done well for Verizon. But the third quarter demonstrates, these devices are still no iPhone. A Verizon iPhone could have a big effect on sales and subscription levels.

Verizon also reported that its wireline business added 204,000 subscribers to its Fios Internet and TV, for a total of 3.3 million, up 26 percent from last year.

During the quarterly conference call, Verizon executives confirmed that it will begin offering a tiered pricing plan as part of a promotion around the holidays. CFO John Killian said the company believes it will have a unique approach to pricing data services. He confirmed that the company will offer a $15 plan that will offer 150 Megabytes of data per month along with the company's $30 unlimited plan. The new $15 a month plan is designed to entice customers to upgrade to smartphones.

He wouldn't comment on what the new pricing plans will look like long term. But he said that changes are likely to occur as Verizon rolls out its 4G LTE network in 38 markets later this year.

"We like the concept of tiered pricing," said Killian, "but we will continue to look at this. We will probably have some pricing changes when we roll out 4G and 4G pricing, so there will be more to come then."

Updated at 11:10 a.m. PDTwith information from the conference call.

 

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