Verizon Communications (NYSE: VZ) reported Q3 EPS of $0.89, $0.03 worse than the analyst estimate of $0.92. Revenue for the quarter came in at $31.6 billion versus the consensus estimate of $31.57 billion.

Wireless Financial Highlights

• Total revenues were $21.8 billion in third-quarter 2014, up 7.0 percent year over year. Service revenues in the quarter totaled $18.4 billion, up 4.8 percent year over year. Retail service revenues grew 4.6 percent year over year, to $17.6 billion.
• Retail postpaid ARPA (average revenue per account) increased 3.5 percent over third-quarter 2013, to $161.24 per month.
• In third-quarter 2014, wireless operating income margin was 31.9 percent and segment EBITDA margin on service revenues was 49.5 percent. This compares with 33.8 percent and 51.1 percent, respectively, in third-quarter 2013.

Wireless Operational Highlights

• Verizon Wireless added 1.53 million retail net connections, including 1.52 million retail postpaid connections, in the third quarter. These additions exclude acquisitions and adjustments.
• At the end of the third quarter, the company had 106.2 million retail connections. This includes 100.1 million retail postpaid connections, a 5.2 percent increase year over year.
• Verizon Wireless had 35.4 million retail postpaid accounts at the end of the third quarter, up 1.3 percent over third-quarter 2013, and 2.82 connections per account, up 3.7 percent year over year.
• During third-quarter 2014, the company added 457,000 postpaid phones and 1.1 million postpaid tablets. At the end of the quarter, smartphones accounted for 77 percent of the Verizon Wireless retail postpaid customer phone base, up from 75 percent at the end of second-quarter 2014.
• Retail postpaid churn was 1.00 percent in the third quarter, an increase of 6 basis points sequentially and 3 basis points year over year. Retail churn was 1.29 percent in the third quarter, up 4 basis points sequentially and 1 basis point year over year.
• The company continued to enhance its 4G LTE device lineup. In the third quarter, Verizon Wireless launched the HTC One Remix, LG G Vista, Kyocera Brigadier, HTC One (M8) for Windows, Apple iPhone 6 and 6 Plus and New Moto X smartphones; the Verizon Jetpack 4G LTE Mobile Hotspot MiFi 6620L, and Samsung Galaxy Tab 4 (10.1) and Tab S 10.5 tablets.
• During the third quarter, Verizon Wireless continued to add capacity to its 4G LTE network, the largest in the United States, using AWS-1 spectrum. This additional bandwidth, called XLTE, is now available in more than 400 markets across the country.

Wireline Consumer Revenue Growth Remains Strong

Verizon's wireline segment reported continued strong results for consumer services, where year-over-year quarterly revenues now have grown by more than 4 percent for nine consecutive quarters.

Wireline Financial Highlights

• Total revenues were $9.6 billion in third-quarter 2014, down 0.8 percent year over year. Consumer revenues were $3.9 billion, up 4.5 percent compared with third-quarter 2013, with FiOS revenues representing 76 percent of the total. Consumer ARPU for wireline services increased to $125.32 per month in third-quarter 2014, up 10.3 percent compared with third-quarter 2013.
• Total FiOS revenues grew 13.4 percent, to $3.2 billion, comparing third-quarter 2014 with third-quarter 2013.
• Wireline operating income margin was 2.3 percent in third-quarter 2014, up from 1.5 percent in third-quarter 2013. Segment EBITDA margin (non-GAAP) was 23.0 percent in third-quarter 2014, flat compared with third-quarter 2013.
• Sales of strategic services to enterprise customers increased 1.0 percent, to $2.1 billion, compared with third-quarter 2013. Strategic services include private IP, Ethernet, data center, cloud, security and managed services.

Wireline Operational Highlights

• In third-quarter 2014, Verizon added 162,000 net new FiOS Internet connections and 114,000 net new FiOS Video connections. Verizon had totals of 6.5 million FiOS Internet and 5.5 million FiOS Video connections at the end of the third quarter, representing year-over-year increases of 8.8 percent and 7.0 percent, respectively.
• FiOS Internet penetration (subscribers as a percentage of potential subscribers) was 40.6 percent at the end of third-quarter 2014, compared with 39.2 percent at the end of third-quarter 2013. In the same periods, FiOS Video penetration was 35.5 percent, compared with 34.9 percent. The FiOS network passed 19.7 million premises by the end of third-quarter 2014.
• By the end of third-quarter 2014, 57 percent of consumer FiOS Internet customers subscribed to FiOS Quantum, which provides speeds ranging from 50 to 500 megabits per second, up from 55 percent at the end of second-quarter 2014.
• As of this week, nearly 5 million FiOS customers have already been upgraded to SpeedMatch upload speeds that mirror download speeds. This upgrade, at no additional customer cost, helps distinguish the benefits of fiber-based broadband.
• Broadband connections totaled 9.1 million at the end of third-quarter 2014, a 1.7 percent year-over-year increase. Net broadband connections increased by 69,000 in third-quarter 2014, as FiOS Internet net additions more than offset declines in DSL-based High Speed Internet connections.
• Verizon has been replacing high-maintenance portions of its residential copper network with fiber optics to provide customers with more resilient infrastructure and reduce repairs, which improves customer satisfaction and reduces costs. In third-quarter 2014, Verizon migrated an additional 55,000 customers to fiber, bringing the year-to-date total to around 200,000.
• In the third quarter, Verizon Enterprise Solutions began deploying innovative enterprise-grade network, cloud, security, mobility and other technology solutions for some of the world's strongest brands: healthcare clients CVS Health, Carestream Health and Atlantic Health System; public sector customers such as the Australian Taxation Office, Australian Department of Foreign Affairs, California Department of Transportation (Caltrans) and Corporation for Education Initiatives in California (CENIC); and industry leaders such as Avianet, Dun & Bradstreet, Property Exchange Australia (PEXA), Telerx, TruGreen and Vanguard Logistics Services (USA), Inc.

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