UPDATE: Verizon Posts 2Q Loss On Buyout Costs; Op EPS Tops View

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 add contract subscribers, bucking the notion that the pool of high-end consumers has completely dried up. Verizon Wireless's strength this quarter highlights the quick shift in subscriber movement as a result of a few key smartphones. The carrier, which is jointly owned by Verizon and Vodafone Group PLC (VOD, VOD.LN), got 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 launch of the Apple Inc. (AAPL) iPhone 4, which continues to be on back order. 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 were previously unable to buy the device. AT&T Chief Financial Officer Rick Lindner said in an interview that he expects subscriber growth to rebound. Verizon Wireless added 665,000 customers who signed a long-term contract, which topped Wall Street expectations, but still represented a 40% decline from a year earlier. Verizon reported a loss of $198 million, or 7 cents a share, from 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, earnings fell to 58 cents a share from 63 cents as revenue dipped 0.3% to $26.77 billion. Analysts polled by Thomson Reuters had 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 the Apple Inc. (AAPL) iPhone and iPad and continued cost cuts. Like Verizon, the number of new contract customers fell steeply from a year earlier. 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. Verizon Wireless has focused on the prepaid market, adding 896,000 customers through its wholesale partners. 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. 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. Verizon shares rose 3% to $27.83 in premarket trading. -By Roger Cheng, Dow Jones Newswires; 212-416-2153; roger.cheng@dowjones.com (END) Dow Jones Newswires July 23, 2010 08:31 ET (12:31 GMT)