By Drew FitzGerald
Verizon Communications Inc.'s wireless and broadband businesses stabilized in the third quarter despite the lasting effects of the coronavirus pandemic, allowing the company to upgrade its profit target for the year.
The carrier's upbeat outlook comes ahead of a potentially competitive holiday shopping season. Apple Inc.'s newest iPhone 12 models, which go on sale in waves starting Friday, have prompted aggressive promotions from cellphone carriers seeking to maintain their market share. Verizon said the discounts will help its bottom line by making it attractive for customers to upgrade their data plans.
Verizon, the country's largest wireless operator in terms of subscribers, added 283,000 postpaid phone connections during the three-month period ended Sept. 30, maintaining its lead over rivals T-Mobile US Inc. and AT&T Inc.
Investors often track postpaid phone plans that charge customers after service is provided to gauge wireless companies' health. Carriers value postpaid subscribers because they switch providers less often than prepaid customers.
More cellphone stores have reopened after earlier closures, and some are offering aggressive discounts for the iPhone 12, which can connect to new 5G networks.
Verizon Chief Executive Hans Vestberg joined an event last week to unveil Apple's four iPhone 12 models and announced plans to expand Verizon's high-speed 5G coverage, which had been limited to major cities for most of the year.
The top three U.S. wireless operators have all started advertising the ultrafast technology, though service remains patchy and network upgrades aren't yet finished. Verizon's offers include free iPhone 12s for new customers who trade in certain older devices and $15 monthly payments for some existing subscribers with trade-ins.
"We believe that we can have a long-term relationship with our customers, and the way we do that is by getting the customer in the first place," Verizon's finance chief, Matthew Ellis, said in an interview. "Even with the promo upfront, it's value for the customer and value for us as well."
Verizon on Wednesday raised its annual adjusted per-share profit target amid improving results over the past nine months. The company said it expects flat to 2% growth in that metric, narrowing the negative 2% to 2% range it issued earlier.
Quarterly net income attributable to Verizon still fell to $4.36 billion, or $1.05 a share, from a year-earlier $5.19 billion profit, or $1.25 a share. The latest result included a $1.1 billion pretax accounting charge after the company readjusted its estimated pension liabilities.
Revenue fell 4.1% to $31.5 billion as the carrier sold fewer phones compared with the year-ago period, when the new iPhone models launched earlier. Wireless service revenue edged up 0.3% to $16.4 billion. Verizon ended the third quarter with 120.3 million wireless connections, which include smartphones and other devices like watches and tablets.
The company posted a net gain of 110,000 broadband customers as installations of its high-speed Fios service surged.
Sales in its media unit, which includes websites like AOL and Yahoo, slipped 7.4% to about $1.7 billion. The company said the division continued to experience weaker traffic from search and website visits during the pandemic but saw activity improve during each of the past three months.
The coronavirus has widened the divide between rich and poor in the U.S., boosting demand from some consumers while straining the bank accounts of many others who remain unemployed. Verizon said about 90% of the 1.2 million customers who signed up for bill relief had made some payment by the end of September and more than half were paid in full.
Verizon's customer base is skewed toward higher incomes, though the company could add more low-cost prepaid plans through its nearly $7 billion purchase of TracFone, which owns brands such as StraightTalk and Simple Mobile. Verizon, which struck the deal with parent company América Móvil SAB in September, expects to close the transaction in the second half of 2021.
Write to Drew FitzGerald at email@example.com
(END) Dow Jones Newswires