That has not quite happened, at least not yet.
On Friday, while reporting its quarterly earnings results, Verizon said it activated 2.3 million iPhones during the company’s second quarter. That is a hefty figure, because the device has been available on Verizon for only a few months, but it paled in comparison to ATT’s iPhone activations for the same quarter. On Thursday, ATT reported that it had activated 3.6 million iPhones on its network, and that nearly a quarter of them were for new customers to ATT.
And activations on ATT’s network have held steady over the last three months, surprising analysts who thought that most customers would wait for the fifth-generation iPhone, widely rumored to be released sometime later this year.
“People overestimated the potential for customers to jump ship for Verizon,” said Phil Cusick, a wireless industry analyst at JPMorgan Chase. “It’s just not at that level.”
Verizon has been selling the iPhone since February, but the second-quarter reports reflect the first full financial period during which the two companies were selling the device in direct competition with one another.
Analysts say several factors favor ATT, including the company’s decision to begin selling a low-cost version of the iPhone, the 3GS, for $50 earlier this year.
In addition, ATT was able to successfully lock customers into one- or two-year contract plans before it lost exclusive rights to sell the iPhone in the United States earlier this year.
Still, analysts said, Verizon is outpacing the entire wireless industry in terms of adding subscribers, even compared with ATT.
Craig Moffett, a wireless analyst at Sanford C. Bernstein Company, said, “Verizon’s wireless business has pretty good momentum right now.”
Over all, Verizon’s earnings were solid, beating Wall Street’s expectations for the company. The company reported net income of $1.61 billion, or 57 cents a share, in contrast to a loss of $1.19 billion during the same period a year earlier. Analysts polled by Thomson Reuters had expected the company to report a profit of 55 cents a share.
Revenue rose 2.8 percent, to $27.54 billion, up from $26.77 billion a year ago. Analysts had expected revenue of $27.4 billion.
Verizon was betting heavily on the arrival of an iPhone in early summer, executives said in a conference call with analysts and investors on Friday. The company had hoped it would nudge the number of subscribers that had smartphones closer to 50 percent.
Historically, Verizon has lagged behind its rivals in pushing its customers toward mobile devices like smartphones, wireless modems and tablets, and the lucrative data packages that come with them. This push will become especially crucial as Verizon, along with its competitors, move from the decaying landline and voice business and increasingly look toward data services for the bulk of their revenue.
Already, Verizon’s wireless business accounts for 60 percent of the company’s total revenue. Money generated from selling mobile data services is close to 40 percent of Verizon’s wireless revenue.
Lowell McAdam, the chief executive of Verizon Wireless, who will succeed Ivan Seidenberg as chief executive of the parent company on Aug. 1, acknowledged that the company was “maybe a quarter behind what we talked about in January.”
But he expressed confidence that the outlook would sharply improve over the coming months, particularly when the next version of the iPhone was released.
“We don’t know when the next one is going to come out,” Mr. McAdams said. “But we expect that probably sometime in the fall, and I think you will see a significant jump there when we get to that point.”
Investors may not have been as optimistic. Shares of the company dipped slightly, down 83 cents, or 2.21 percent, to $36.74.
One issue with the introduction of the iPhone to Verizon was whether the carrier would buckle under the crush of the new data-intensive users. It has not, which analysts attributed to the fact that Verizon had several years to upgrade its network and infrastructure while watching ATT struggle with this problem. “Verizon was better prepared thanks to ATT,” said Chetan Sharma, an independent wireless analyst.
But even ATT’s network, long the source of complaints from beleaguered users who said they got poor cellular reception and suffered from dropped calls, has improved over all, Mr. Sharma said.
Verizon’s results were lifted by strong growth in the company’s wireless arm, which is 45 percent owned by Vodafone. The company reported a sharp increase — 1.3 million — in net new subscribers in the quarter. Smartphones accounted for 36 percent of Verizon Wireless’s postpaid subscriber phone base, up from 32 percent in the first quarter of the year. Verizon recently began rolling out its fourth-generation wireless network, which uses a fast wireless technology called LTE, and is heavily marketing tablets and smartphones that are compatible with that new technology.
Verizon’s earnings might also shed some light into the brewing rivalry between Apple and Google and both look to dominate the smartphone and tablet industry. Although Verizon continued to achieve sales from its catalog of Android and 4G devices, the company sold far fewer of those devices than they did iPhones. For the quarter, the company reported sales of 1.2 million LTE and Android devices, which includes tablets, smartphones and wireless modems.
“Verizon’s had Android for a long time,” said Mr. Sharma, who keeps a close eye on the industry. “This was the first real test between an iPhone and Android and consumers still gravitate towards the iPhone.”
Article source: http://feeds.nytimes.com/click.phdo?i=0a638d7ed5829650be6581cc24fe8411
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