Verizon Widens Lead Over AT&T

Carrier Signs Up More Wireless Customers Despite AT&T's Exclusive Deal to Sell Popular iPhone By AMOL SHARMA and ROGER CHENG Verizon Communications Inc. posted strong first-quarter results in its wireless unit, edging out rival AT&T Inc. in customer additions for the first time since Apple Inc.'s iPhone 3G went on sale last summer. Verizon Wireless, a joint venture with Vodafone Group PLC, added 1.3 million net new customers in the period, a notch above the 1.2 million added by AT&T, the exclusive U.S. carrier of the iPhone. AT&T's exclusive U.S. rights to the iPhone expire next year, but the carrier is trying to get an extension from Apple until 2011, according to people familiar with the matter. Verizon CEO Ivan Seidenberg said in a recent interview that it is unlikely his company and Apple would partner to create a device tailored to Verizon's current network. Even without an iconic device like the iPhone, Verizon has managed to keep pace with AT&T and deliver solid growth in its wireless business, relying on basics like network quality and customer service as well as a broad selection of smart phones from handset makers like Research In Motion Ltd. "The iPhone is important, but you can still sell a million or more devices in a quarter that aren't the iPhone," said Chris Larsen, a telecom analyst at Piper Jaffray & Co. "The iPhone isn't for everyone." An AT&T spokesman touted the strength of iPhone sales and said the carrier was taking customers away from every rival. Verizon Wireless and AT&T, the top two U.S. wireless providers by subscribers, are widening their lead as smaller players struggle. Deutsche Telekom AG issued a profit warning last week, citing weakness in its T-Mobile USA wireless business, while analysts expect Sprint Nextel Corp. to report next week it lost at least one million more contract customers during the first quarter. Verizon ended the quarter with an industry-leading 86.6 million total wireless customers, including 13.2 million subscribers added through the acquisition of Alltel Corp. AT&T ended the first quarter with 78.2 million customers. Overall, Verizon posted net income of $3.21 billion, or 58 cents a share, in the quarter, up from $3.05 billion, or 57 cents a share, a year earlier. Revenue increased 12% to $26.59 billion. If Alltel had been part of Verizon a year earlier, the sales increase would have been 3.3%. Verizon's landline unit took a harder hit from the economy. The consumer business continued to contract as the company lost 671,000 access lines and revenue fell 3.8%. On the business side, revenue declined 3.4% to $3.7 billion. More Digits: Verizon Says No News on iPhone, Netbooks 04/27/09Verizon CEO Eyes Global Assets 04/16/09AT&T, Verizon Make Different Calls 01/28/09"The good news is we don't see it getting worse," said Chief Financial Officer John Killian, referring to spending by businesses. "We see stabilization there right now." AT&T's exclusive U.S. rights to the iPhone expire next year, but the carrier is trying to get an extension from Apple until 2011, according to people familiar with the matter. Verizon Chief Executive Ivan Seidenberg said in a recent interview that it is unlikely his company and Apple would partner to create a device tailored to Verizon's current network, which is based on a technology called CDMA. "Apple never had any intension of making a CDMA" version of the iPhone, Mr. Seidenberg said. He said previous overtures by Apple prior to the launch of the original iPhone were meant to help Apple gain negotiating leverage over AT&T. In coming years, both Verizon and AT&T will be upgrading their networks to a fourth-generation standard called LTE. Analysts say it is far more likely Verizon and Apple will wait to collaborate on a 4G iPhone. In an interview Monday, Verizon President and Chief Operating Officer Denny Strigl said Apple "should consider an LTE arrangement, and my guess is they would." Last week, Apple Chief Operating Officer Tim Cook said Apple is "very happy" with its AT&T relationship. Asked if it would make sense to create an iPhone for Verizon's existing 3G network, Mr. Cook said, "CDMA doesn't really have a life to it after a certain point in time." One trouble spot for Verizon in its wireless results was a slight uptick in monthly customer turnover to 1.47% of its subscriber base from 1.19% a year ago. Mr. Strigl blamed businesses cutting back on their wireless accounts, as they lay off workers, and consumers disconnecting laptop broadband cards. Verizon continued to add customers to its Fios high-speed Internet and TV services. Verizon added nearly 300,000 customers to each service during the quarter. Write to Amol Sharma at amol.sharma@wsj.com and Roger Cheng at roger.cheng@dowjones.com