Verizon Reports 23% Profit Gain, Aided by Wireless Expansion

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For Verizon Communications, getting a head start on rolling out a faster fourth-generation wireless network is paying off.

A surge in wireless subscribers and smartphone sales, combined with more subscribers to its digital TV and Internet services, propelled the company to a profit of $2.25 billion in the second quarter, up 23 percent from the same period a year earlier.

Verizon, which is based in New York, said investment in its fourth-generation wireless network, called LTE, helped its growth. For its wireless business, the company added 941,000 contract subscribers, the most valuable type of customer.

The company also reported improved smartphone sales, partly on the back of demand for the iPhone. In the quarter, Verizon sold 7.5 million smartphones, including 3.9 million iPhones. In the year-ago quarter it sold 5.9 million smartphones, including 2.7 million iPhones.

Like other wireless carriers, though, Verizon appears to be keeping an eye on industry data showing that fewer people are upgrading to new smartphones year after year. To combat that trend, two of its top competitors, AT&T and T-Mobile USA, recently announced plans that would make it cheaper for customers to upgrade their phones before the typical two-year wait.

On Thursday, Verizon, the No. 1 wireless carrier, announced a similar plan. Verizon's program, called Edge, will allow customers to pick the phone they want and then sign up for a monthly payment plan. The full price of the phone will be spread over 24 months. The customer can upgrade in as little as six months by paying off 50 percent of the original phone by then.

"Our customers have been asking for another option," said Francis J. Shammo, Verizon's chief financial officer, on the company's earnings call. He said some people did not want to wait two years before buying a new smartphone.

But Verizon's early-upgrade plan appears likely to attract only a small portion of the market, the high-spenders who must have the latest and greatest smartphones. Craig Moffett, an analyst at Moffett Research, said that plan was unlikely to add much to the company's profits. But Verizon's move, he said, shows that it is reacting to T-Mobile, the fourth-largest American carrier, which was the first carrier to introduce early-upgrade plans.

"I think T-Mobile's plan is taking share, and they have to do something about it," he said.

Over all, Verizon's revenue rose 4.3 percent, to $29.8 billion, compared with the same quarter a year ago. The company's net income was 78 cents a share, compared to 64 cents a share in the period a year ago. After excluding a one-time gain related to pension benefits, Verizon's net income was 73 cents a share, beating analyst expectations of 72 cents, according to data from Thomson Reuters. Shares of the company were down 1.5 percent to close at $49.97 on Thursday.

Verizon is planning to invest even more money in the 4G network. It said it would increase capital spending this year to $16.4 billion to $16.6 billion, an increase from its original plan to spend $16.2 billion.

The company also said that it added 161,000 subscribers to its Internet service and 140,000 to its video service. Verizon's Internet service now has 5.8 subscribers and its video service has 5 million.

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This article originally appeared in The New York Times.


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