Verizon Communications reported first-quarter EPS of USD 1.15, up from USD 0.68 a year earlier thanks to its acquisition of the remaining stake in Verizon Wireless. This was the US operator's fifth consecutive quarter of double-digit earnings growth. Adjusted EPS rose 23.5 percent to USD 0.84.
Driven by wireless and Fios services, total operating revenues increased 4.8 percent to USD 30.8 billion. Operating profit was up 15.1 percent to USD 7.2 billion, and the operating margin was 23.2 percent, up from 21.1 percent. The EBITDA margin increased to 36.7 percent from 35.1 percent a year ago. Cash flow from operating activities declined to USD 7.1 billion from 7.5 billion, while capital expenditures totalled USD 4.15 billion. The company continues to target full-year investments in the range of USD 16.5-17 billion, with a decrease in capital spending as a percentage of total revenues.
Wireless revenues in the quarter increased 6.9 percent to USD 20.9 billion. Service revenues totalled USD 18.0 billion, up 7.5 percent, and retail revenues grew 6.7 percent to USD 17.2 billion. Retail postpaid ARPA (average revenue per account) rose 6.3 percent to USD 159.67 per month. The Wireless operating margin was 35.0 percent, and the EBITDA margin on service revenues was 52.1 percent, up from 32.9 percent and 50.4 percent, respectively.
During the quarter, Verizon Wireless added 549,000 retail net connections, including 539,000 retail postpaid net connections. At quarter-end, the company had 103.3 million retail connections, including 97.3 million retail postpaid connections, representing a 4.4 percent increase from the previous year. Verizon Wireless had 35.1 million retail postpaid accounts at the end of the quarter, up 0.3 percent, and 2.77 connections per account, up 3.7 percent.
At quarter-end, smartphones accounted for more than 72 percent of the Verizon Wireless retail postpaid customer phone base, up from 70 percent. Retail postpaid churn was 1.07 percent, up 6 basis points. Retail churn was 1.37 percent, up 7 basis points.
Wireline consumer revenues rose 6.2 percent to USD 3.8 billion, as consumer ARPU for wireline services increased 11.3 percent to USD 120.17. Representing 74 percent of total consumer revenues, Fios consumer revenues grew 14.6 percent. For the first time, total quarterly Fios revenues surpassed USD 3 billion. The Wireline operating margin was 1.5 percent, up from 0.1 percent a year earlier, and the adjusted EBITDA margin rose to 22.3 percent from 21.4 percent. Sales of strategic services to global enterprise customers increased 1.8 percent.
During the quarter, Verizon added 98,000 net new Fios internet connections and 57,000 net new Fios Video connections. Verizon had totals of 6.2 million Fios internet and 5.3 million Fios Video connections, representing increases of 9.9 percent and 8.7 percent year-on-year, respectively. Fios internet penetration was 39.7 percent, up from 38.2 percent, and Fios Video penetration rose to 35.0 percent from 34.1 percent. The Fios network passed 18.9 million premises at quarter-end.
By the end of the quarter, 51 percent of consumer Fios Internet customers subscribed to Fios Quantum. Broadband connections totalled more than 9.0 million, up 1.5 percent. Net broadband connections increased by 16,000 as Fios Internet net additions more than offset declines in DSL-based internet connections.
Verizon continues to target top-line growth of 4 percent and adjusted EBITDA margin expansion in 2014, with positive contributions to profitable growth from both wireless and wireline. Verizon reiterated guidance of increases in both the wireless and wireline EBITDA and EBITDA margin in 2014.
