Sharing is good for Verizon, as Share Everything plan boosts third-quarter results

NEW YORK, N.Y. – Verizon’s Share Everything plan looks like it’s good for the company’s shares.

The parent of the nation’s largest cellphone company on Thursday reported a blowout number of new devices on its network, boosted by the revolutionary plan, introduced four months ago. The plan made it cheaper for households to add wireless service to tablets and laptops.

Verizon Wireless added a net 1.5 million devices to contract-based plans in the third quarter, more than it has in many years. Analysts were expecting it to add about 900,000. Including non-contract devices, overall additions were the strongest in four years.

Verizon is gaining market share in wireless, said Sanford Bernstein analyst Craig Moffett. “Unless one believes that industry growth rates accelerated – and we certainly don’t – Verizon’s gain is AT&T’s, Sprint’s, and T-Mobile’s loss,” he said.

Verizon said 13 per cent of its customers with contract-based plans were already on Share Everything, signalling that the plan has caught on, helped by aggressive advertising. Chief Financial Officer Fran Shammo said customers were adding huge numbers of “mobile hotspot” devices, which allow the sharing of Internet service over several other devices, like PCs and tablets.

That’s helped push up how much subscribers are paying. The average household with a contract-based plan paid $145.42 per month in the quarter for wireless service, up 6.5 per cent from a year ago.

Get weekly money news

Get expert insights, Q&A on markets, housing, inflation, and personal finance information delivered to you every Saturday.

Sign up for weekly money newsletter Get Started

By providing your email address, you have read and agree to Global News' Terms and Conditions and Privacy Policy.

Verizon ended the quarter with a billing relationship for 96 million wireless devices on its network, plus an undisclosed number through wholesale relationships. No. 2 AT&T had 77 million direct-billed wireless devices at the end of June.

The launch of the iPhone 5 at the end of the quarter also helped Verizon’s numbers. It activated 650,000 units of the new model in just over a week, according to Shammo. It activated 3.1 million iPhones of all kinds in the quarter, accounting for 46 per cent of its total smartphone activations.

The launch of an iPhone usually brings down Verizon’s earnings in a quarter, because it has to pay Apple about $600 per phone, which it sells for $199. It then makes the money back over the course of a two-year contract. But the iPhone 5 launched so late in the quarter that it failed to weigh seriously on Verizon’s profitability. Its operating profit margin in wireless was 31.8 per cent, the highest in years.

However, not all of the wireless profits flow to parent company Verizon Communications, which only owns 55 per cent of Verizon Wireless. The rest of the wireless division is owned by Vodafone Group PLC of Britain, which gets a corresponding share of the profits. The wired side of Verizon Communications operates at break-even.

For the three months ended Sept. 30, New York-based Verizon Communications reported earnings of $1.59 billion, or 56 cents per share. That’s up from $1.38 billion, or 49 cents per share, a year ago.

Removing 8 cents per share in charges related to patent lawsuit settlements, earnings were 64 cents per share. That matched analysts’ expectations. In September, Verizon said it would pay TiVo Inc. $250 million to settle allegations that the video recording feature of its TV set-top boxes infringe on TiVo’s patents, and $260 million to settle a suit by ActiveVideo Networks Inc. regarding video-on-demand features.

Revenue increased 4 per cent to $29.01 billion from $27.91 billion. That also matched analysts’ expectations.

Verizon’s stock increased $1.06, or 2.4 per cent, to close Thursday at $45.78 after the results came out.

The company also said it’s still on pace to meet its 2012 financial goals.

On the wireline side, revenue continued to shrink, and Verizon posted the first decline in overall broadband customers in four years, as it stopped marketing DSL connections to customers who don’t also buy phone service. DSL connections are slower than cable modems, and Verizon has stopped investing in the technology, focusing instead on fiber-optic FiOS connections available in about two-thirds of the areas where it provides local phone service.

Verizon’s report is the first for telecommunications companies this earnings season. Rival AT&T Inc. reports on Wednesday.