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By Sinead Carew
NEW YORK, Oct 17 (Reuters) - Verizon Communications Inc on Thursday posted stronger- than-expected third-quarterearnings and revenue driven by wireless growth, sending itsshares up nearly 4 percent.
While wireless customer growth was slightly below WallStreet estimates, its Verizon Wireless venture with VodafoneGroup Plc posted good profit and revenue growth ascustomers spent more on data services. Verizon has agreed to buyout Vodafone's 45 percent share of the venture.
The subscriber shortfall caused some concern the company,the first U.S. telephone operator to report this quarter, waslosing market share to rivals such as T-Mobile US Inc.
New Street analyst Jonathan Chaplin said that whileVerizon's financials were "outstanding," "there were clear signsthat a resurgent TMUS is impacting even Verizon."
Chief Financial Officer Fran Shammo conceded somelower-spending customers moved to rival services in the quarter,but said some customer additions were delayed to the fourthquarter mostly due to supply constraints involving Apple Inc's iPhone. About one-half its smartphone sales wereiPhones.
Still, Shammo told analysts on the company's quarterlyconference call that "we continue to gain market share."
The executive said that 8.4 percent service revenue growthat Verizon Wireless was sustainable in the short term butexpected the growth rate to decline in the future.
Verizon Wireless added 927,000 net retail subscribers in thequarter, compared with Wall Street expectations of about 1million customers, according to eight analysts, with estimatesranging from 900,000 to 1.2 million.
While much of Verizon's growth was from customers connectingdevices like tablet computers, Verizon said phone customers,still made up the most of its growth at 481,000.
Verizon said it expects wireless customer growth to improvesequentially in the fourth quarter but did not give specificestimates.
ENTERPRISE WEAKNESS
Verizon reported a third-quarter profit of $2.2 billion, or78 cents per share, compared with $1.59 billion, or 56 cents pershare, a year ago.
Excluding unusual items, Verizon earned 77 cents per sharein the quarter, compared with Wall Street expectations of 74cents, according to Thomson Reuters I/B/E/S.
Its wireless profit margin was 51.1 percent, based onearnings before interest, taxes, depreciation andamortization(EBITDA) as a percentage of service revenue, andabove its target range of 49 percent to 50 percent for the fullyear.
Rethemeier said the profit margin would likely come down inthe fourth quarter due to steep holiday season costs, since thecompany kept its wireless margin target for the year despite thestrong third-quarter number.
Revenue rose 4.4 to $30.28 billion from $29.01 billion. WallStreet expected $30.16 billion, according to Thomson ReutersI/B/E/S.
Strong wireless service revenue growth for the quarter wasoffset by a decline of 3 percent in its global enterprisebusiness and a slower 4.3 percent rise in its consumer business,which includes its FiOS television service.
Verizon's enterprise business was affected by governmentbudget cutbacks and cost cuts in the private sector, accordingto Shammo, who expects the business to remain flat in 2014.
"Generally speaking, enterprise customers continue to becautious regarding new investment decisions," Shammo said.
Verizon shares rose 3.7 percent to $49.02 in morning tradeon the New York Stock Exchange.
