Verizon rakes in subscribers with help of iPhone

Verizon Wireless added 906,000 wireless subscribers from January to March, which is more than twice as many during the same period last year

Paul Sakuma / AP
In this April 19, 2011 photo, an Apple iPhone 4G customer holds the AT&T, left, and Verizon Apple iPhones at an Apple store in Palo Alto, Calif. Helped by the Apple iPhone 4G, Verizon Wireless is pulling in more high-paying subscribers than it has in a year, and 15 times more than rival AT&T.

NEW YORK (AP) — Helped by the iPhone, Verizon Wireless is pulling in more high-paying subscribers than it has in a year, and 15 times more than rival AT&T.

Verizon Communications Inc. on Thursday said it added 906,000 wireless subscribers on contract-based plans in the January to March period, more than double the number of a year ago.

Verizon Wireless started selling the iPhone on Feb. 10, ending AT&T's exclusive grip on the device in the U.S.

Verizon said it had activated 2.2 million iPhones, putting it on track to reach the average analyst estimate of 11 million sold by the end of year.

AT&T said Wednesday it had added 3.6 million to its network in the first quarter, helped by the $49 price on the older iPhone 3GS, which Verizon does not sell. AT&T also had three months to sell the phone, compared to one and a half for Verizon. AT&T said it added 62,000 subscribers under contract in the first quarter.

Though AT&T posted a record-low number of new contract subscribers, there was no sign of its existing iPhone subscribers defecting to Verizon for the sake of a more reliable network. Since most subscribers are tied up by two-year contracts, it may take some time for the full effects of Verizon's iPhone to show up in AT&T's numbers, but AT&T's Chief Financial Officer, Rick Lindner, said he was confident subscribers won't start bolting later this year.

Verizon said its net income climbed to $1.44 billion, or 51 cents per share, in the three months ended March 31, up from $443 million, or 16 cents per share, a year ago, when results were weighed down by a charge for costs associated with the health care reform package.

Analysts polled by FactSet were on average expecting earnings of 50 cents per share.

Verizon's revenue edged up 0.3 percent to $26.99 billion from $26.91 billion a year ago and slightly exceeded the analyst estimate of $26.87 billion.

Verizon shares fell 65 cents, or 1.7 percent, to $37.14 in pre-market trading. The shares are close to a three-year high of $38.95.

Though the iPhone is a highly coveted device both for consumers and carriers, it doesn't lead to an immediate bonanza. Verizon's operating income was flat with the year before, as growing revenue from the wireless business was offset by increasing costs due to sales of heavily subsidized smartphones like the iPhone.

New York-based Verizon Communications owns 55 percent of Verizon Wireless, so only that portion of the wireless profits flow to its bottom line. The remaining 45 percent is owned by Vodafone Group PLC of Britain.

On the wireline side of Verizon, margins are tiny in a shrinking business, but the company managed to cut costs faster than revenue slid in the first quarter.

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