Verizon reported strong Q2 performance, including the addition of over 2.5 million LTE subscriptions and significant increases in operating cash flow. Verizon Wireless generated record-high margins and strong operational results, and Verizon's Wireline segment generated continued increases in revenues from FiOS fiber-optic services and strategic business services.
Verizon's total operating revenues were $28.6 billion on a consolidated basis, an increase of 3.7 percent compared with second-quarter 2011. Consolidated operating income was $5.7 billion in second-quarter 2012, compared with $4.9 billion in second-quarter 2011. Consolidated EBITDA (non-GAAP, earnings before interest, taxes, depreciation and amortization) totaled $9.8 billion in second-quarter 2012, compared with $9.0 billion in second-quarter 2011.
"Verizon delivered another strong quarter of earnings growth and cash generation, and we remain on track to meet our financial objectives and produce solid double-digit earnings growth for the year," said Lowell McAdam, Verizon chairman and CEO.
In its conference call, Verizon said it is "very pleased" with the pace of LTE consumer adoption. Verizon now has nearly 11 million LTE subscribers, representing 12% of its 89 million retail postpaid connections. About 70% are smartphones and 30% are Internet devices. This means 19% of the company's smartphone base has an LTE handset. During the quarter, Verizon Wireless sold 2.9 million DROID smartphones, 2.5 million of which were #LTE, and 2.7 million Apple iPhones, up from 2.3 million a year ago. Of LTE sales, 20% were new to Verizon and 80% were upgrades.
Some Wireless Highlights
Service revenues in the quarter totaled $15.8 billion, up 7.3 percent year over year. Retail service revenues grew 8.6 percent year over year, to $15.2 billion.
Data revenues were $6.9 billion, up $1.1 billion - or 18.5 percent - year over year, and represent 43.6 percent of all service revenues. Total revenues were $18.6 billion, up 7.4 percent year over year.
Retail postpaid ARPU grew 3.7 percent over second-quarter 2011, to a record $56.13, the highest growth in three years. Retail postpaid data ARPU increased to $24.53, up 15.4 percent year over year. Retail service ARPU grew 3.4 percent year over year, to a record $54.29.
Added 1.2 million retail net customers in the second quarter, including 888,000 retail postpaid net customers.
At the end of Q2, the company had 94.2 million retail customers, a 4.9 percent increase year over year, including 88.8 million retail postpaid customers.
Smartphones constituted 50 percent of Verizon Wireless' retail postpaid customer phone base, up from 47 percent at the end of first-quarter 2012.
Retail postpaid churn was 0.84 percent, the lowest in four years, and an improvement of 5 basis points year over year. Total retail churn was 1.11 percent, an improvement of 11 basis points year over year.
Some Wireline Highlights
Wireline operating revenues were $9.9 billion, a decline of 3.1 percent compared with second-quarter 2011. Wireline operating income margin was 1.9 percent, compared with 1.6 percent in first-quarter 2012 and 3.1 percent in second-quarter 2011. Segment EBITDA margin (non-GAAP) was 23.1 percent in second-quarter 2012, compared with 22.6 percent in first-quarter 2012 and 23.8 percent in second-quarter 2011.
Consumer revenues grew 2.5 percent compared with second-quarter 2011, the highest increase in several years. Consumer ARPU for wireline services reached more than $100 for the first time, increasing to $100.26 in second-quarter 2012, up 8.5 percent compared with second-quarter 2011.
ARPU for FiOS customers increased to more than $149 in second-quarter 2012. FiOS services produced 65 percent of consumer wireline revenues in second-quarter 2012. Approximately 70 percent of FiOS consumer customers have purchased a "triple play" of phone, Internet and TV services.
Global enterprise revenues totaled $3.8 billion in the quarter, down 3.4 percent compared with second-quarter 2011. Sales of strategic services increased 4.4 percent compared with second-quarter 2011 and represented 52 percent of global enterprise revenues in second-quarter 2012. Strategic services include Terremark cloud services, security and IT solutions, and strategic networking.
Verizon added 134,000 net new FiOS Internet connections and 120,000 net new FiOS Video connections in second-quarter 2012. Verizon had a total of 5.1 million FiOS Internet and 4.5 million FiOS Video connections at the end of the quarter.
FiOS Internet penetration was 36.6 percent at the end of second-quarter 2012, compared with 33.9 percent at the end of second-quarter 2011. In the same periods, FiOS Video penetration was 32.6 percent, compared with 29.9 percent. The FiOS network now passes more than 17 million premises.
Broadband connections totaled 8.8 million at the end of second-quarter 2012, a 2.6 percent year-over-year increase.
Verizon launched several network projects during the second quarter, including deployment of next-generation routing equipment on the global Private IP network to meet growth demands, improve scalability and support 10 gigabit customer access ports and 40G and 100G backbone trunk ports; and a long-term core network architecture project for a common multi-protocol label switching (MPLS) backbone platform that will support current and future service demands.
The company also launched its first major initiative to build additional control plane technology into its network infrastructure. This will allow Verizon to deliver on the promise of cloud-based and mobility-enabled industry solutions, as well as enable rapid and automated recovery of complex optical mesh networks.
China Mobile Hong Kong has selected Ericsson to expand their commercial LTE network with TD-LTE in Hong Kong. Ericsson is already the sole supplier for China Mobile Hong Kong's LTE FDD network. Ericsson will also upgrade the operator's existing Evolved Packet Core (EPC) network. Financial terms were not disclosed.
China Mobile Hong Kong's FDD LTE mobile data service launched in April. The carrier now plans to launch a TD-LTE network to complementing its existing LTE FDD network. The converged LTE FDD/TDD network will be launched as early as the fourth quarter, when devices that support both modes become available in larger volumes.
Under the agreement, Ericsson will deliver the TD-LTE radio access network, network management using Ericsson OSS-RC, Evolved Packet Core network expansion and upgrade, consulting and systems integration services as well related design, training and support services.
Ericsson noted that it has now signed 67 LTE/EPC contracts in 30 countries on five continents. http://www.ericsson.com
There have been measurable improvements by ISPs in meeting their advertised speeds, according to a new Report on Consumer Wireline Broadband Performance in the U.S. that was issued by the FCC. <> ISPs generally achieved these gains by improvements in network performance, and not downward adjustments to the speed tiers offered. There was also a significant increase in the actual average speed delivered by participating ISPs to their customers over the past year.
The data for the report was generated by a software app deployed in the homes of thousands of volunteer consumers who conducted automated, direct measurements of broadband performance. The connections were DSL, cable and fiber.
The report finds that differences among ISPs in their ability to deliver advertised speeds are now narrowing.
In addition, the report notes a steady migration of consumers to higher speed services, and an encouraging upgrade cycle by ISPs to boost the performance of their service tiers and introduce even faster offerings. http://www.fcc.gov/measuring-broadband-america/2012/july 19-Jul-12
Nokia posted dismal Q2 results, as sales of devices and services fell 5 percent sequentially and 26 percent year over year. Gross margin in Q2 was 18.1 percent, down 630 basis points sequentially primarily due to the recognition of approximately 220 million EURO of inventory related allowances in Smart Devices. Overall net sales for the company totaled 7,542 million Euros and there was a net loss of 826 million Euros. Sales of devices in all geographic regions, except North America where revenue was up from a small base.
“Nokia is taking action to manage through this transition period. While Q2 was a difficult quarter, Nokia employees are demonstrating their determination to strengthen our competitiveness, improve our operating model and carefully manage our financial resources. We shipped four million Lumia Smartphones in Q2, and we plan to provide updates to current Lumia products overtime, well beyond the launch of Windows Phone 8. We believe the Windows Phone 8 launch will be an important catalyst for Lumia," stated Stephen Elop, Nokia CEO.
Some highlights:
4 million Lumia smartphone sales.
Nokia ended Q2 with gross cash of EUR 9.4 billion and net cash of EUR 4.2 billion.
In Q2,Nokia received a quarterly platform support payment of USD 250 million (approximately EUR 196 million)
For Nokia's Location business, net sales were 283 million Euro, up 2 percent sequentially and 4 percent year over year.
Nokia Siemens Networks returned to non-IFRS operating profitability in Q2 as the company saw financial improvement resulting from its restructuring program.
In Q2 2012, net sales of Nokia Siemens Networks decreased 8% to EUR 3,343 million. Gross profit in Nokia Siemens Networks was EUR 833 million (gross profit EUR 967 million), representing a gross margin of 24.9% (26.6%).
The company said the decline in net sales in the second quarter 2012 was primarily due to its strategy to focus on mobile broadband, customer experience management and services. Business areas not consistent with the new strategy are in the process of being divested or managed for value.
Zayo is undertaking a 521-mile fiber build in the greater Denver area. The fiber build will span the Front Range, encompassing the cities of Fort Collins, Greeley, Loveland, Longmont, Boulder, Colorado Springs, and the larger Denver metro area. Zayo said the investment will bolster its presence in the central business districts of Denver and Colorado Springs.
Adding this network expansion to the existing Zayo and AboveNet assets, Zayo will have 900 route miles of fiber network in the greater Denver area. http://www.zayo.com
Palo Alto Networks announced the initial public offering of 6,200,000 shares of its common stock at a price to the public of $42.00 per share.
Goldman, Sachs & Co., and Citigroup Global Markets, Inc. are acting as lead joint book-running managers for the offering, and Credit Suisse, Barclays, UBS Securities LLC, and Raymond James & Associates, Inc. are acting as book-running managers for the offering.
ADVA Optical Networking reported Q2 revenues at a record high of EUR 85.9 million, up 10.3% vs. EUR 77.8 million in Q2 2011 and up 5.2% vs. EUR 81.7 million achieved in Q1 2012. This result is at the upper end of guidance of between EUR 81 million and EUR 86 million.
The company posted IFRS pro forma operating income, excluding stock-based compensation and amortization & impairment of goodwill & acquisition-related intangible assets, of EUR 6.8 million or 8.0% of revenues in Q2 2012, above guidance of between 3% and 7% of revenues.
"We are very pleased with our Q2 2012 revenues of EUR 85.9 million, which are at the upper end of guidance and are up 5.2% vs. our previous quarter and 10.3% vs. Q2 2011. The quarter-on-quarter increase is driven largely by investments in carrier infrastructure and enterprise solutions, reflecting the continued network traffic growth due to video applications and the increasing adoption of cloud computing services, coupled with rising demand for innovative enterprise network technology in a broad range of verticals. Year-on-year, the pick-up is mostly related to higher demand for Ethernet transport solutions for mobile backhaul and enterprise access applications," commented Jaswir Singh, chief financial officer & chief operating officer of ADVA Optical Networking. http://www.advaoptical.com
Ericsson's Q2 Sales increased 1% YoY and 9% QoQ to SEK 55.3 billion, although sales for comparable units, adjusted for FX and hedging, decreased -6% YoY. Gross margin was down YoY to 32.0% (37.8%), and from 33.3% QoQ. Net income decreased to SEK 1.2 (3.2) b. due to lower profitability in Networks and increased loss in ST-Ericsson. EPS diluted was SEK 0.34 (0.96). EPS Non-IFRS, excluding restructuring, was SEK 0.78 (1.60).
“In the quarter, demand for Global Services and Support Solutions was strong, while Networks sales decreased YoY mainly due to the expected decline in CDMA equipment sales as well as lower business activity in China, including weaker sales of GSM and lower 3G sales in Russia,” says Hans Vestberg, President and CEO of Ericsson. “In Global Services all areas showed good growth in the quarter due to operators’ focus on operational efficiency and high project activities. The strong development for Support Solutions was driven by billing systems and TV solutions. Global Services and Support Solutions together represented about half of the Group’s revenues. The growing Global Services business has a dilutive impact on gross margin."
Some notes from the company's financial presentation:
Networks sales decreased -17% YoY primarily due to the expected decline in CDMA equipment sales as well as weaker development for GSM sales in China and slower operator investments in Russia. CDMA equipment sales declined close to -50% YoY to SEK 2 b. and are expected to continue its rapid decline in H212.
Ericsson now has seven contracts for its Smart Services Router (SSR) signed to date.
Ericsson sees greater LTE sales as the technology is now reaching outside initial rollout countries.
Global Services continued to show strong momentum with growth of 26% YoY and 17% QoQ and all areas grew.
The acquired Telcordia operation added sales of SEK 1.1 b. in the quarter, split 50/50 between segments Global Services and Support Solutions.
Global Services represented 44% (35%) of total sales in the quarter compared to 40% in Q112. Support Solutions sales were strong with 47% growth YoY and 15% QoQ driven by strong demand for billing systems and TV solutions.
The company noted 17 new signed contracts in Managed Services.
Both Global Services and Support Solutions were positively impacted by the added sales from the acquired Telcordia. The growth in these areas are dilutive to the Group's overall gross margin.
Verizon reported strong Q2 performance, including the addition of over 2.5 million LTE subscriptions and significant increases in operating cash flow. Verizon Wireless generated record-high margins and strong operational results, and Verizon's Wireline segment generated continued increases in revenues from FiOS fiber-optic services and strategic business services. 
China Mobile Hong Kong's FDD LTE mobile data service launched in April. The carrier now plans to launch a TD-LTE network to complementing its existing LTE FDD network. The converged LTE FDD/TDD network will be launched as early as the fourth quarter, when devices that support both modes become available in larger volumes.
