Half Of Verizon Wireless Subscribers Use Smartphones

Verizon Communications today reported solid second quarter earnings, recording a profit of $5.7 billion on operating revenues of $28.6 billion. Pretty much every business unit saw positive increases compared to previous quarters, and Verizon's wireless and wireline businesses both made headway against competitors.

Looking specifically at Verizon's wireless unit, the company reached an important milestone: half of all its wireless subscribers now use smartphones. That's up from 47% at the end of the first quarter. Verizon rival AT&T has historically been faster to add smartphone subscribers to its ranks. Smartphone subscribers generate more revenue than feature phone subscribers.

In direct correlation to its increase in smartphone subscribers, Verizon saw ARPU (average revenue per use) increase across the board. Postpaid ARPU grew to a record $56.13. Retail postpaid data ARPU increased to $24.53, and retail service ARPU increased to a record $54.29.

[ More than half of all smartphones in the U.S. now run Android. Read more at Android Strengthens Lead Over U.S. Smartphone Rivals. ]

Verizon's wireless unit raked in $18.6 billion in total revenue, with data alone accounting for $6.9 billion.

In total, Verizon added 1.2 million customers, 888,000 of which are the more profitable post-paid type. The company reported a total of 94.2 million customers, of which 88.8 million are post-paid. Churn, or the rate at which customers leave Verizon for other carriers, was 1.11%. Of note, Verizon said it added 3.2 million new LTE 4G customers during the second quarter. That number means the bulk of new 4G subscribers were existing customers.

Drilling down into device sales, Verizon reported that it sold 2.7 million iPhones. That's down by 500,000 compared to the previous quarter. During the same period, Verizon sold 2.9 million Android smartphones. This is a reversal of sorts for Verizon's Android sales, which have typically lagged iPhone sales. Together, iPhone and Android sales amounted to 5.6 million devices. Verizon didn't indicate how many BlackBerrys it sold during the second quarter.

During the earnings call, Verizon CFO Fran Shammo dropped some interesting bits of information that will keep device fanatics frothing. When discussing the outlook for device sales, he hinted strongly that Verizon expects iPhone sales to decline over the next few months due to softening demand ahead of a major new device release expected in the fourth quarter. Shammo could only have been referring to the Apple iPhone 5, which many believe will arrive in September or October. Let's hope it has a bigger display in order to compete against those Android smartphones.

Verizon also took time to boast about the growth of its LTE 4G network, which is now live in 337 markets and on target for 400 by the end of the year. Verizon's LTE is available to 230 million Americans, or about 75% of the U.S. population.

Verizon's wireless business continues to be a juggernaut. Can anything slow it down? Absolutely. The company said it expects the government to greenlight its proposed acquisition of 122 AWS spectrum licenses from a consortium of cable companies by this summer. The FCC is prepared to approve the deal, but the FTC hasn't made a decision. If the FTC moves to block the deal, Verizon's sunny summer will cloud over quickly.

At this year's InformationWeek 500 Conference C-level execs will gather to discuss how they're rewriting the old IT rulebook and accelerating business execution. At the St. Regis Monarch Beach, Dana Point, Calif., Sept. 9-11.