Verizon Wireless reported a sound performance for the quarter ended 31 December 2010, trumpeting “strong growth in revenue, strong retail postpaid ARPU, and growth in traditional customers and other connections.” The company saw an 18.9 percent increase in operating income to US$4.85 billion, on revenue up 5.7 percent to US$16.1 billion. For the full year, it saw a 12.5 percent operating income increase to US$18.7 billion, on revenue up 5.1 percent to US$63.4 billion. For Q4, data revenue was 37.1 percent of service revenue, up from 31.8 percent in Q4 2009.
At the end of the period, the company had a total of 102.2 million connections, which included 94.1 million “customers” and 8.1 million “other” connections – such as machine-to-machines and telematics applications. With Verizon Communications’ wireline business still suffering from changes in the competitive market, Lowell McAdam, its COO, noted that more than 60 percent of group revenue is now attributable to its wireless operation.
There are certainly signs that the operator is benefiting from the growth in smartphones. At the end of 2010, 26 percent of its retail contract customers had these devices, up from 15 percent at year-end 2009, and in the fourth quarter more than 75 percent of its contract net additions were smartphone buyers. In its conference call, the company forecast that it will pass the 50 percent smartphone penetration mark before the end of 2011. The company also highlighted that there is significant potential growth to come from within its own customer base: currently 52 percent of its customers own feature phones without data plans, for example.
Unsurprisingly, much attention was placed on its planned iPhone launch, although Fran Shammo (pictured), its CFO, declined to provide much in the way of detail: “I’m not going to give you an exact forecast, because there are too many variables that go into this.” It was highlighted that the company has been preparing for the launch for some time, and Shammo also made reference to a consensus analyst opinion that the operator would shift 11 million iPhones this year. While noting the potential for the device, McAdam also iterated: “one thing we said we would never allow ourselves to become is a one-phone company.”
Verizon also provided an update on the progress of its fledgling LTE network, stating that in the three weeks between network launch and the end of the quarter, some 65,000 dongles were sold, of which 41 percent went to customers new to Verizon Wireless. The company reiterated plans to expand its LTE network to 140 markets by the end of 2011. Lowell McAdam said: “I believe that LTE is a real game changer, and I don’t use that term lightly,” highlighting the potential of the technology to boost data throughput and cut latency, the latter of which was referred to as “the piece that some people miss.” Alongside its LTE deployments, McAdam noted that “we think 3G will continue to be a growth engine not only in 2011, but for some years to come.” The company also said it had sold 86,000 tablet devices.
Finally, the relationship between Verizon Communications and Vodafone Group, the parents of Verizon Wireless, was discussed. McAdam noted that the companies have an evolving relationship, progressing from a partnership that was essentially based on their finances. He said: “If you look back over the last 11 years, our technology has been so far apart it has been difficult to reach across the aisle.” However, with the companies now progressing toward LTE, more commonalities are emerging. “We are putting in place a strategy and structure to operationalise this relationship,” he said, noting opportunities to align roadmaps and use integrated account teams to serve multinational customers. No timeframe was given for the resumption of dividend payments to the parents, although it was stated that “eventually” cash would be paid out: “as we get to the end of this year, we will sit down with the board and see what a fair and reasonable dividend is,” McAdam noted.