Gap between Verizon's wireless and wireline arms widens

Verizon may have always been a regional Bell operating company with a major wireless business, but as its fourth quarter results show, it's becoming a wireless company with a wireline company along for the ride. Once again, gains at Verizon Wireless continued to shore up losses at Verizon Communications, further broadening the gap between parent and daughter companies, but in the last quarter the chasm grew particularly wide.

VZW added 2.2 million net subscribers in the last three months of year, 1.2 million of which were postpaid and 1 million wholesale. Verizon remains the marker leader in size, quickly approaching the 100 million-sub mark with 91.2 million total mobile customers. Total wireless service revenues remained flat quarter-over-quarter at $13.5 billion and were up only 5% year-over-year, showing the continued pricing pressure US operators are seeing on voice. But VZW's data revenues continued to balloon, increasing $200 million over the third quarter to $4.3 billion and 26.6% year-over-year. Data now accounts for 31.9% of all service revenues. Almost half of that revenue now comes from advanced data services such as web access and e-mail, rather than messaging, driven by higher penetration of smartphones (15% of total subscribers) and 3G multimedia handsets and devices (11% of total subscribers). Average revenue per user (ARPU) for data breached $16 in Q4, up 18% year-over-year. And with a $20 to $30 data plans now required on all 3G phones based on VZW's revamped pricing structure, data revenues will likely spike further in 2010 even as voice revenues drop.

But total wireline service revenues fell $100 million quarter over-quarter to $11.5 billion, representing a 3.9% drop year-over-year. On the residential side, access line loss showed no signs of improving with Verizon posting a further 12.3% decline, and Verizon continued to shed DSL customers, shedding 107,000 broadband lines. Its FiOS service didn't do much to make up the difference, adding only 153,000 new customers for both video and broadband services in the fourth quarter. That demonstrates a sizable slowdown in customer acquisition since last year even though it has expanded the FiOS footprint to cover nearly half of the homes in its footprint.