2nd UPDATE: Verizon Posts 2Q Loss; Wireless Growth Remains

(Updates with additional analyst in third paragraph; executive comments in sixth, 14th and 16th paragraphs; stock quote in last paragraph) By Roger Cheng Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Verizon Communications Inc. (VZ) swung to a loss in the second quarter on charges related to the divestitures of assets and its ongoing round of layoffs, but its wireless arm continued to sign subscribers to long-term contracts, bucking the notion that the pool of high-end consumers has completely dried up. Verizon Wireless's strength this quarter highlights the influence that a few key smartphones hold. The carrier, which is jointly owned by Verizon and Vodafone Group PLC (VOD, VOD.LN), received a boost from the increased demand in its line of Droid phones, which run on Google Inc.'s (GOOG) Android software. It also likely benefited from the late-second-quarter launch of the Apple Inc. (AAPL) iPhone 4, which continues to be on back order. "Verizon likely took share in the quarter despite the launch of a new iPhone," said Mike McCormack, an analyst at J.P. Morgan. The customer shift could reverse in the third quarter as AT&T Inc. (T) and Apple make more iPhone 4s available in the market, drawing new customers who previously were unable to buy the device. AT&T Chief Financial Officer Rick Lindner said in an interview that he expects subscriber growth to rebound in the third quarter. Verizon Wireless, meanwhile, added 665,000 contract customers, which topped Wall Street expectations but still represented a 40% decline from a year earlier. "A lot of people last quarter were suggesting postpaid was coming to the end," Chief Financial Officer John Killian told analysts. "We said there was a lot of life left at Verizon." Verizon reported a loss of $198 million, or 7 cents a share, compared with a profit of $1.48 billion, or 52 cents a share, a year earlier. Excluding the impact of its divestiture of landline assets to Frontier Communications Corp. (FTR) and Alltel wireless assets to AT&T and Atlantic Tele-Network Inc. (ATNI), earnings fell to 58 cents a share from 63 cents as revenue dipped 0.3% to $26.77 billion. Analysts polled by Thomson Reuters most recently forecast earnings of 56 cents a share on $27.11 billion in revenue. On Thursday, AT&T posted a 26% increase in second-quarter earnings, with strength in the wireless business driven by sales of Apple's iPhone and iPad and continued cost cuts. Like Verizon, the number of new contract customers fell steeply from a year earlier. Sprint Nextel Corp. (S) and T-Mobile USA also are expected to post weak results on the postpaid end. As a result, the carriers have sought new revenue streams. AT&T has focused on increasing the number of customers with data plans, as well as with connecting nontraditional devices such as electronic-book readers. It added more than three times as many connected devices as its rival. Verizon Wireless, meanwhile, has focused on the prepaid market, adding 896,000 customers through its wholesale partners in the quarter. The carrier preferred to keep an arm's length from the prepaid segment; its own service ceded more than 200,000 customers in the period. The wireline operations continued their descent, with total lines falling 9.2% and revenue of $11.1 billion falling 3.3% from a year earlier. Verizon added 174,000 FiOS TV customers and 196,000 FiOS Internet customers, offsetting continued declines in its traditional DSL business. The company said it expects 11,000 "voluntary separations" this year as it sheds jobs in its slower growing businesses. The company cut 3,800 wireline jobs in the period, with more than 9,200 employees transferred to Frontier. Killian said the company would look at additional work-force reductions in other areas of the business. Verizon's global business services unit reported a slight uptick in revenue, although its wholesale wireline traffic business fell 8.3% from a year earlier. Killian said he remained cautious optimistic about a full economic recovery but noted that the employment level and data usage remains weak. Verizon shares rose 3.9% to $28.05 in recent trading. -By Roger Cheng, Dow Jones Newswires; 212-416-2153; roger.cheng@dowjones.com (END) Dow Jones Newswires July 23, 2010 10:00 ET (14:00 GMT)