Verizon Wireless saw improvement in poaching customers from other carriers in the fourth quarter, but Apple's iPhone remains a missing piece of the puzzle.
There were a couple of telling exchanges on the Verizon earnings conference call. On Tuesday, Verizon's fourth quarter earnings matched estimates.
First, Verizon executives were asked whether the company's map ad campaign against AT&T was working out in terms of poaching customers.
John Killian, CFO of Verizon, said:
On porting, we did see improvement in the fourth quarter on porting overall. We don't give specifics on carrier by carrier, but we are pleased with our performance there. We were definitely at a disadvantage on the higher end of the market with our smart phone lineup. The introduction of the DROID and other products helped us a lot there. So we're pleased with our performance from a net add perspective, and we see that opportunity to continue on the porting side as we go into 2010.
Those comments indicate that Verizon has bolstered its smartphone lineup vs. AT&T and is making some progress courtesy of the Droid.
Of course, the next elephant in the room was Apple's iPhone. Verizon wasn't going to say whether it would get the device, but was asked about whether the network could handle the data demand.
Tim Horan, an analyst at Oppenheimer, asked Verizon executives the following:
You guys have clearly been operating the best wireless network in the US and probably globally. But the iPhone and high end smart phones have been taking down networks all over the place and impacting margins. How do you avoid that from happening to you?
And maybe related to that, if you can give us some color where the trends are right now with the existing high-end smart phone sales as a percentage of total sales, maybe even usage, so that when you do get the iPhone we can just gauge how much more of an incremental impact that will be.
Verizon CEO Ivan Seidenberg said:
On the iPhone question, I think your summary is fair. I think we should start out with the idea that, as the iPhone has been out in the marketplace for now several years, they've gotten some good traction. It's a good product, and they've done a good job.
I think, as you move forward though, as we move to LTE and we start to see a completely different dynamic out in the marketplace with eight times the capacity and much lower cost per transport of a megabit, I think we are feeling very comfortable that the smart phone market will move into more parity for us with respect to handling that.
We have done a lot of work in modeling what the DROID does, what the Palm will do, what the Eris does and what the BlackBerry does. So we feel we know what the capacity limitations are in this, and we are feeling pretty good that we are out in front of this issue. And to the extent that usage picks up, I think our guys have done a very good job in making sure that we stay in front of that issue. And I know most investors are worried about that. But over the course of the last 10 years, this is what we pride ourselves on doing. So I'm comfortable that we are in good shape on this.
We've spent a lot more capital in the last two years on capacity than probably people realize. And I think, when you look out, as we move into 2011 and we start to get into full deployment of LTE, we're going to get a big, big improvement in terms of our efficiency. And so we are feeling good about that. So I wouldn't think there's anything to worry about on the capital. When something comes along that would drive us to suggest we need to spend more, we'll tell you. I don't think at this point there's anything to worry about.
Translation: Verizon isn't saying it will get the iPhone, but it's ready just in case.