Verizon Beats Earnings Estimates on Stronger User Gains

Verizon Communications, the largest US wireless carrier, exceeded profit estimates on stronger customer gains even as rivals including T-Mobile US brought more price competition to the industry.

While subscriber growth drove the profit gains, wireless margins and the size of customers’ phone bills were smaller than analysts expected. More than 82 percent of those new customers were tablet buyers, Verizon said.

With the company selling more tablets than phones and offering discounts on data plans, customers’ monthly phone bills will likely shrink, putting more pressure on wireless margins, said Kevin Smithen, an analyst with Macquarie Securities USA.

The average size of customers’ monthly bills grew 4.7 percent to $159.73. Verizon’s wireless service margins expanded to 50.3 percent. Verizon’s Edge plan spreads the phone charges over 20 months and lowers service plan charges by $10 or $25 a month depending on the data allotment.

While the shift threatens to erode wireless service revenue and margins, the move may help keep customers from switching to T-Mobile, which was the first carrier to offer phone financing in early 2013.