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Verizon Added Fewer Subscribers In 2Q Than AT&T

The company is still the largest U.S. carrier with 87.7 million subscribers, but the iPhone and prepaid services may be drawing customers away.

Verizon Wireless said Friday it added 1.1 million net customers for its second quarter, which is behind rival AT&T's subscriber growth for the same period.

Verizon released its subscriber numbers before its quarterly earnings announcement, which will be issued Monday, and one day after AT&T reported a strong second quarter with 1.4 million new customers. Verizon is still the largest U.S. carrier with 87.7 million customers, but it is facing increased competition in the high-end and low-end markets.

Apple's iPhone 3GS had a successful launch during the second quarter, and it sold over a million units worldwide during its debut weekend. While not all of these were for AT&T, the iPhone has proven to be capable of poaching high-spending customers away from Verizon, Sprint Nextel, and T-Mobile. AT&T said it activated 2.4 million iPhones in the quarter, and more than two-thirds of its new subscribers came for Apple's touch-screen smartphone.

Verizon does offer strong, exclusive smartphones of its own, and devices like the BlackBerry Storm have sold well. The company is also planning to offer more high-end smartphones to combat the iPhone, and CEO Lowell McAdam said it will have a sequel to the Storm, a Palm Pre, and an Android device within "the next six months or so."

The global economic recession may also be chipping away at Verizon's growth, as some customers are looking to prepaid providers to save on cellular service. Providers like Leap Wireless, MetroPCS, and Virgin Mobile have reported high numbers of new customers, and the Sprint-owned Boost Mobile added 700,000 new customers in the quarter after introducing a $50 unlimited plan.

A good indicator of Verizon's position will be the rate at which subscribers cancel service, which is known as the churn rate. AT&T reported the lowest churn rate in the company's history Thursday, and Verizon will reveal its figure Monday.

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