For the second quarter ending June 30, the carrier reported net income of $2.11bn, up from $1.79bn. The sale of the fixed-line and direct operations in Hawaii contributed $336m to its earnings, while tax benefits of $242m were recognized on investment losses from last year. Meanwhile, sales were up 4.6% at $18.57bn from $17.76bn in the year ago quarter.
Despite the earnings slightly missing analyst expectations, shares in the carrier were up nearly 1% at $34.33 on the New York Stock Exchange as of 5pm BST Tuesday.
Verizon Wireless, the second largest mobile operator in the US, continued to perform strongly, and sales rose 14.6% to $7.8bn as it increased its subscriber base by 1.9 million customers to a total of 47.4 million.
Verizon Wireless is a joint venture between Verizon Communications, which holds a 55% stake, and the world’s largest mobile operator, Vodafone Group Plc, which holds a 45% stake.
During the quarter, Verizon Wireless managed to improve on its industry-leading subscriber retention, reducing the rate of customer losses to 1.2% of the subscriber base per month. By contrast, its larger rival, Cingular Wireless LLC, reported a churn rate of 2.2% for the second quarter.
Cingular Wireless is currently the largest mobile operator in the US as the result of its $41bn acquisition of AT&T Wireless Service Inc in February 2004. The Atlanta-based mobile operator’s subscriber base grew by 1.1 million during the last quarter, boosting its total to 51.6 million customers.
Meanwhile, Verizon Wireless’s average revenue per user fell 2.7% to $49.42 per month, suggesting that price competition from rivals such as Cingular may be forcing more promotional activity to lure and retain customers.
Verizon’s traditional fixed-line business continued to decline, but once again the fall was offset by gain in its mobile and broadband subscribers. Fixed-line revenue dipped 0.5% point to $9.46bn in the second quarter, although Verizon noted that the consumer business showed a slight increase for the first time since the company began reporting those figures three years ago. The company also added 278,000 broadband customers.
The New York-based telecommunications outfit is also spending more, mostly on upgrade costs of its network. Capital spending in the quarter rose 28% to $4.06bn. Verizon raised its 2005 capital spending forecast to a 15% increase from the $13.3bn spent in 2004, up from its prior estimate for a 10% increase.
Part of the increase is to be spent on preparations for launching a video service later this year, with a broader roll-out scheduled for 2006. Verizon is currently running fiber-optic connections to homes in 15 US states, and has applied for about 200 video franchises.
Verizon is currently hoping to close its hotly contested $8.6bn takeover of MCI Inc by the end of the year. However, it is waiting for approval from the US Securities and Exchange Commission, before holding a shareholder vote.
