UPDATE:Verizon Wireless Seen Taking Larger Shares In Mobile Market

By Daniel | July 22, 2008

NEW YORK (Dow Jones)–It appears Verizon Wireless doesn’t need the iPhone after
all.

The wireless carrier - a joint venture between Verizon Communications Inc. (VZ)
and Vodafone Group PLC (VOD) - said Tuesday that it added 1.5 million net new
customers in the second quarter, a tick higher than Wall Street expectations. The
number indicates it is taking a larger slice of the wireless subscriber pie,
likely at the cost of rivals such as market leader AT&T Inc. (T).

“(Verizon Wireless’ numbers) are going to show that they’re continuing to take
market share from all of the other carriers out there,” said Christopher King, an
analyst at Stifel Nicolaus.

AT&T is seen as potentially vulnerable. Wall Street analysts, on average, expect
the wireless carrier to add 1.3 million net new customers. Apple Inc.’s (AAPL)
unveiling of its new iPhone 3G may have contributed to the weakness, as customers
held off on signing up until after the device was released July 11, after the end
of the second quarter.

“AT&T is not going to put up 1.5 million net adds tomorrow,” King said.

A spokesman for AT&T declined to comment. The company reports its second-quarter
results Wednesday.

The new iPhone will likely boost results in the current third quarter, and AT&Tcould report surprisingly strong numbers for the second quarter. But any signs of
weakness could place it in a precarious position as growth in the U.S. wireless
industry slows, and competitive pressure heats up.

“The question is whether share gains are sustainable,” said Craig Moffett, an
analyst at Sanford Bernstein. “We could be into a hot handset cycle for a while
where share moves more fluidly than it has in the past.”

Verizon Wireless has shown resiliency in the face of an economic downturn that
has choked off consumer spending. The carrier typically signs up a vast majority
of its net additions into long-term contract customers, and routinely reports the
industry’s lowest turnover rate. More details on the customer additions will be
available when the company reports its full second-quarter results Monday.

AT&T and Sprint Nextel Corp. (S) count a large number of their customer additions
from lower-end prepaid and wholesale customers, which typically don’t generate as
much revenue or profits. As a result, their financial metrics have lagged Verizon
Wireless.

Looking ahead, it’s unclear whether Verizon Wireless will be able to maintain its
customer growth. But William Power, an analyst at Robert Baird, notes that the
carrier has been fairly consistent with its growth. He expects the trend to
continue even as the wireless industry slows.

Growth will also come in the form of an acquisition by Verizon Wireless. It
agreed last month to buy Alltel Corp. (AT) for $28 billion, adding its 13 million
rural customers to its base of 68.7 million and making it the de facto leader in
the U.S.

AT&T ended the first quarter with 71.4 million subscribers.

Verizon Communications fell 15 cents to $35. AT&T fell 1.1% to $31.46.

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