Verizon Wireless said LTE device sales hit 4.5 million in the third quarter after the launch of the iPhone 5 brought more customers onto its mobile broadband network.
The iPhone 5 was the first version of the smartphone to be compatible with LTE.
Verizon sold 3.1 million iPhones last quarter, up from 2.7 million in the second quarter. Of those iPhone sales, 21 percent were the LTE-capable iPhone 5, CFO Fran Shammo said during the company’s earnings call today.
That means Verizon customers bought about 651,000 iPhone 5’s over the nine days between the time the device launched on Sept. 21 and the end of the third quarter on Sept. 30.
The influx of LTE smartphones increased the number of LTE devices on Verizon’s network to 14.9 million, from just 3.1 million during the same period last year. Sales of LTE smartphones, tablets and modems appear to be ramping quickly, with a 44 percent increase between the second quarter and third quarter.
LTE devices now comprise 16.5 percent of the operator’s postpaid subscriber base. Overall, Verizon sold 6.8 million smartphones, with Android sales of 3.4 million outpacing iPhone sales.
A spike in iPhone sales usually erodes profit margins because of the heavy subsidies associated with the device. But Verizon managed to buck the trend by lowering its overall upgrade rate to about 7 percent, from 8.6 percent last year. This led to increased profits in its wireless segment, where operating income rose 17 percent to $6 billion on revenue of $19 billion.
Shammo said device upgrades would likely increase this quarter during the holiday buying season, but said the resulting deterioration in profit margins would not be as severe as last year. Verizon has taken steps to slow down the rate at which customers upgrade to new devices, helping to reduce its subsidy expenses.
The debut of Verizon’s shared data plans this summer prompted the company to roll out a new financial metric, average revenue per account (ARPA), which will eventually replace its current average revenue per user (ARPU) metric.
“The change in reporting aligns with the strategic intent of our shared data plans since driving service revenue growth is the most relevant metric going forward is the amount of revenue generated per account,” Shammo said.
Under the new metric, ARPA grew 6.5 percent over last year to $145.42. However, Bernstein Research analyst Craig Moffet points out that under the old ARPU metric, postpaid ARPU grew less than 3 percent to $56.37.
Smartphone sales are the top growth driver for operators. Verizon reported that 53 percent of its postpaid base now uses smartphones, up from 39 percent last year.
Verizon posted a jump in postpaid customer growth, adding 1.53 million net postpaid subscribers, an increase of 74 percent over last year. It also grew its prepaid base, adding 228,000 customers. Verizon’s retail customer base now stands at nearly 96 million.
Churn dipped to 1.18 percent, from 1.26 percent last year.
