Verizon Communications Inc., the second-largest U.S. phone company, reported an increase in profitability at its wireless unit that topped analyst estimates as sales of smartphones boosted customers’ bills.
The profit margin in the Verizon Wireless business, based on earnings before interest, taxes, depreciation and amortization, rose to 50 percent in the third quarter from 49 percent in the previous quarter, the New York-based company said today in a statement. The average estimate of eight analysts compiled by Bloomberg was for 48.4 percent.
Verizon Wireless, 45 percent owned by Vodafone Group Plc, added 1.54 million net contract customers in the quarter, beating the 901,000 estimate by analysts. Verizon and AT&T Inc., the largest U.S. phone company, are taking shares from competitor T-Mobile USA, said Kevin Roe, an analyst with Roe Equity Research in New York.
“The subscriber number beat the highest estimate on the street,” said Kevin Roe, an analyst with Roe Equity Research in New York. “Part of that was from tablets, and I also think the T-Mobile trend of losing significant customers continues.”
More smartphone users watching videos or streaming music meant bigger phone bills and a 6.5 percent rise in the price for the average monthly contract account to $145.42. The wireless gain helped offset slumping sales to business customers.
Verizon rose as much as 3.8 percent to $46.42 and was up 2.8 percent as of 12:43 p.m. in New York. The shares have climbed 11 percent through yesterday this year.
Verizon Chief Financial Officer Fran Shammo said the company was seeing better than expected adoption of its Share Everything plan that gives users one data allotment to use with as many as 10 devices.
Verizon designed the plan to capitalize on heavier data users. The plan’s prices are higher than comparable plans at other carriers, said Tero Kuittinen, a New York-based analyst at Alekstra Oy, a mobile-diagnostics company.
“We are providing a network that delivers data wherever you are, and we think there might be a slight premium for that,” said Shammo in an interview today.
Verizon’s third-quarter per-share earnings excluding some items were 64 cents, compared with 56 cents a year earlier. Net income attributable to Verizon rose 16 percent to $1.59 billion. Third-quarter sales climbed 3.9 percent to $29 billion. Profit and sales were in line with analysts estimates.