Growth sources are tapped out
While Verizon's sales and earnings were pretty much in line with market estimates, its wireless subscriber growth was pretty disappointing. In particular, the company's base of retail subscribers paying monthly service fees grew by only 423,000, compared with about a million a year ago. Considering that AT&T only did a little better, adding 512,000 such subscribers during the quarter, and that Sprint
What's more, with fewer new subscribers left to pick up, Verizon and AT&T have decided to take their gloves off in battling for existing subscribers, as shown by the major price cuts each company announced earlier this year to its unlimited voice plans. Thanks in part to these price cuts, Verizon's retail wireless service revenues grew by only 5% annually -- this, in spite of retail data service revenues growing by 25.6%, owing to the popularity of smartphones such as Motorola's
Meanwhile, with Verizon winding down the rollout of its FiOS fiber-to-the-home platform, FiOS net subscriber additions have gone into a nosedive that they're unlikely to pull out of. Net subscriber additions for FiOS' TV service totaled only 168,000 in the quarter, down from 299,000 in the year-ago period. And while decreased FiOS investments might be bringing down capital spending for Verizon's Wireline division, this decision also means that the company is depriving itself of a vital growth source needed to offset the rapid decline in the number of traditional local voice lines serviced by the company. This decline was the biggest reason why Verizon's Wireline revenues fell by 2.9% annually, and the entire company's revenues were up by only 1.2%.
Will the iPhone arrive?
It's in this context that the release of an iPhone that runs on Verizon's EV-DO 3G network becomes a big deal. Even by the standards of an old-school phone company rather than an up-and-coming tech company, Verizon's growth prospects are looking like they're on very shaky ground. But if Steve Jobs decides that the threat from Google's
On the other hand, if Jobs decides that he'd rather keep things simple, and doesn't want to work with Big Red until he can offer an iPhone based on the next-generation LTE standard (supported by AT&T and numerous international carriers, in addition to Verizon), then Verizon investors are probably in for a bumpy ride over the next year. Even if Verizon holds its own against its biggest competitor.
Fool contributor Eric Jhonsa has no position in any of the companies mentioned. Sprint Nextel is a Motley Fool Inside Valuerecommendation, Google is a Rule Breakers pick, and Apple is a Stock Advisor selection. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool is investors writing for investors.