Verizon profit beats on customer additions; revenue outlook lowered
(Reuters) - Verizon Communications Inc on Tuesday lowered its full-year revenue target after users on average paid less for its services during the second quarter amid continuing industry competition and promotional activity.
Investors shrugged off higher-than-expected earnings from the largest U.S. wireless service provider and sent its shares down 2.5 percent.
Verizon said it expected full-year revenue growth of at least 3 percent, below its previous forecast of 4 percent.
Average revenue per user of $153.73 was down 3.8 percent from a year earlier and below the analysts' average forecast of $154.99, MoffettNathanson analyst Craig Moffett said in a note.
In an industrywide trend, wireless carriers have replaced traditional two-year contracts with equipment financing plans that allow payments in monthly installments. The plans have lower service fees but do not subsidize devices.
"When you shift to an installment sale-type plan from a subsidy plan, you are going to have dilution in service revenue," Chief Financial Officer Fran Shammo said in an interview.
Customers shifted to the installment plan at a higher rate than expected, he said.
Net income attributable to Verizon rose to $4.23 billion, or $1.04 per share, in the quarter from $4.21 billion, or $1.02 per share, a year earlier.
Analysts on average were expecting $1.01 per share, according to Thomson Reuters I/B/E/S.
Revenue rose to $32.22 billion from $31.48 billion, missing analysts' estimates of $32.87 billion.
Verizon added a net 1.1 million wireless retail postpaid subscribers, who pay each billing cycle based on usage, in line with estimates from analysts polled by market research firm FactSet StreetAccount.
New tablet sign-ups totaled 852,000, and wireless phone additions were 321,000.
Wireless carriers have been offering heavy promotions and discounts on tablet and phone plans as they try to boost crucial subscriber growth numbers and limit customer defections, or churn.
"Notwithstanding this pressure on average revenue per user, Verizon's wireless margins remain the envy of the industry," Moffett said.
Churn for Verizon's wireless postpaid business fell to a three-year low of 0.90 percent, while FactSet had expected 0.99 percent.
Revenue from Verizon's FiOS high-speed Internet, TV and phone service rose 10 percent to $3.4 billion.
After its $4.4 billion purchase of AOL Inc in June, Verizon is gearing up to introduce its online video service to generate new revenue from mobile video and targeted advertising.
Verizon shares were down 2.5 percent at $46.89 in midday New York Stock Exchange trading.
(Reporting By Malathi Nayak in New York, Devika Krishna Kumar and Lehar Maan in Bengaluru; Editing by Saumyadeb Chakrabarty and Lisa Von Ahn)