Verizon profit drops 25% in Q3; FiOS TV adds 204,000 new subscribers

Verizon (NYSE:VZ) reported its third-quarter earnings dropped 25 percent, as wireless subscriber growth slowed and landline operations struggled to make a profit.

The company said its FiOS TV service continued to add customers, with 204,000 net additions, bringing its total subscriber base to 3.3 million.

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Verizon, which has aggressively sold off its wireline holdings to companies like Frontier, reported earning of just $19 million on its wireline business compared to $4.9 billion for wireless operations, of which the New York-based company owns only a 55 percent stake.

The company reported net income of $881 million (31 cents per share), compared to $1.18 billion (41 cents per share) a year ago. Third-quarter 2010 results included 25 cents per share in non-operational charges, the largest of which was a non-cash charge related to pension settlements. The company said that excluding the one-time charge for a pension settlement would have put EPS at 56 cents.

"Verizon built on a strong second quarter with a stronger third quarter, resulting in improved earnings performance and substantial cash flow," said Chairman and CEO Ivan Seidenberg. "We are building momentum and are on track to achieve our goal of growing earnings in the second half of the year. We are excited by the opportunities we see to expand wireline margins and the growth we see related to the upcoming launch of next-generation wireless services."

Verizon said it's FiOS TV subscriptions grew 19 percent from last quarter with FiOS Internet adding 226,000 net new customers, a 17 percent improvement, its largest net quarterly increase in FiOS customers in more than a year.

FiOS TV penetration edged forward 27.2 percent by the end of the quarter, with the product available for sale to 12.1 million premises. This compares with 25.1 percent and 10.4 million, respectively, at the end of third-quarter 2009.

Verizon said that in more mature FiOS markets, penetration rates have shown consistent growth to more than 35 percent, with a few markets in excess of 40 percent.

On a revenue basis, FiOS, including FiOS Digital Voice, grew 29.2 percent year over year. FiOS revenues generated approximately 50 percent of consumer wireline revenues in third-quarter 2010, compared with approximately 40 percent in third-quarter 2009.

Total wireline broadband and video revenues -- including FiOS Internet, FiOS TV and HSI (DSL-based high-speed Internet) -- were $1.8 billion in the quarter, up 20.8 percent from third-quarter 2009.

AT&T yesterday reported its revenue and profits were up in the third quarter, driven by wireless growth and the continued strength of its U-verse business. The telco said revenues were $31.6 billion, up 2.8 percent or $847 million, from the same period a year ago. The Dallas-based company reported 236,000 new U-verse subscribers, and a whopping 2.6 million new wireless subscribers. AT&T reported a 30 percent increase in IP data revenues and the first year-over-year growth in wireline consumer revenue in more than two years.

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