It's hard to find an area of the economy unscathed by the turmoil kicked off in the housing and financial markets. Until this quarter, it appeared that major U.S. telecom providers such as Verizon Communications (NYSE:VZ) wouldn't see much of an impact, but Verizon's numbers show that it is not immune either.
In the first quarter, I noted that Verizon was holding up just fine and that it had -- in the words of the company -- "weathered the current economic uncertainty." This quarter is a little different, though.
While Verizon posted solid numbers, the carrier saw a large number of phone lines lost -- 920,000 in all -- with many of these customers going to competing cable companies such as Comcast (NASDAQ:CMCSA) and Time Warner Cable (NYSE:TWC). While CFO Doreen Toben noted that seasonal factors weighed into the lost lines figure, COO Denny Strigl was a little more blunt, noting that the figure was "higher than what we had been geared for."
Overall, Verizon's revenue came in at $24.1 billion and earnings were even a little better than expected, at $1.88 billion. The revenue figure was 3.6% higher than last year, while the net income level totaled a 12% increase. Financials continue to be fueled by strong performance in the wireless group, where investors already knew that the joint venture with Vodafone (NYSE:VOD) netted an industry-leading 1.5 million subscribers.
Verizon noted that 70% of its growth in wireless is coming from data rather than voice. Just as AT&T (NYSE:T) is losing voice revenue, Verizon is seeing the same trend, but more than making up for it by selling customers wireless data capabilities like email via Research In Motion (NASDAQ:RIMM) Blackberrys and broadband access.
And while Strigl noted that the company had seen a minimal short-term impact from the launch of the latest Apple (NASDAQ:AAPL) iPhone with AT&T, he believes the device has actually stimulated the sale of higher-end smartphones which now make up more than 30% of Verizon's handset sales. Personally, I've been hard-pressed to find many telecom companies that are not citing the iPhone as a positive force across the industry.
So while Verizon does indeed have many problems to contend with in this economy, the company so far has been able to make up for it with success in other areas.
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