Verizon’s Profit Climbs as Subscriber Growth Slows

Verizon Wireless, the nation’s largest cellphone carrier, is not gaining as many new contract subscribers as it once was. But its profit remains strong thanks to swelling revenue from mobile data — the fees it collects for Internet use — and healthy smartphone sales.

Verizon Communications, the parent company of the wireless business, reported Thursday that its profit in the second quarter rose 13.4 percent to $1.8 billion, or 64 cents a share, from a year ago.

The company said revenue climbed 3.7 percent to $28.6 billion.

The profit was in line with analysts’ expectations, according to a survey by FactSet.

The company’s overall profit, which includes pretax operating income for Vodafone, which owns 45 percent of Verizon’s wireless unit, was $4.3 billion, a 19.3 percent increase.

Verizon, which is based in New York, said smartphone sales and revenue from its cellphone subscribers helped its results.

“Verizon Wireless has once again demonstrated its industry leadership, combining strong revenue growth with record margins and high customer loyalty,” Lowell McAdam, Verizon’s chief executive, said in a statement.

In the quarter, Verizon Wireless added 888,000 contract subscribers, the most valuable type of customer for the company, down from 1.26 million a year ago. But total revenue from mobile data was $6.9 billion, up 18.5 percent from a year ago.

Those results perpetuate an industrywide trend: contract subscriber growth is slowing because most people who want cellphones have them. So now the carriers are improving profits by using different pricing structures for mobile data, or by attracting one another’s customers with new smartphones and faster data networks.

Verizon sold 5.9 million smartphones in the quarter, including 2.9 million Droid handsets and 2.7 million iPhones. Typically, iPhone sales slow in summer because many consumers expect Apple to introduce an upgraded version in the fall. Nonetheless, Apple’s handset aided Verizon’s growth: A quarter of the people buying iPhones were new to Verizon. Over all, 73 percent of Verizon’s phone sales to subscribers were smartphones.

Verizon is leading the race in the United States to build faster fourth-generation networks, using a technology known as Long Term Evolution. It has LTE deployed in 337 cities, compared with AT&T, which has installed it in 47 cities.

In late June, Verizon introduced “shared data” plans, which allow customers to pay for a pool of wireless data and share it across multiple smartphones, tablets and laptops, a first for the American wireless industry. For new Verizon customers, shared plans and prepaid plans will be the only options. The older tiered data plan is no longer available to new customers.

The shared plans took effect too late to influence Verizon’s earnings, but some analysts said imposing shared plans on new subscribers was a bold move. The plans offer value to high-income families that already spend a lot for data, text and phone services, but not to people who are light users and are trying to save money.

Fran Shammo, Verizon’s chief financial officer, said in a conference call that the company did not expect shared data plans to have an immediate impact. But he said that the new pricing structure was already prying some customers away from their older unlimited data plans, which will help the company make more money over time.

“The benefit we do see is that we are seeing some 3G unlimited customers move into our 4G shared data plan product,” Mr. Shammo said. “That is excellent for us.”

Following Verizon, AT&T introduced its shared data plans on Wednesday with nearly identical pricing.

Tero Kuittinen, an independent mobile analyst and vice president of Alekstra, a company that provides services to help consumers reduce their cellphone bills, said that the shared data plans were a sign that Verizon and AT&T had grown confident that they would not lose subscribers to smaller rivals, no matter how expensive their plans become.

“This is what happens in a duopoly,” Mr. Kuittinen said in an interview. “One company raises prices, and the other does the same thing. It looks like AT&T and Verizon have both concluded that they’re not serious competitors.”

Shares of Verizon Communications declined $1.35, or 2.9 percent, on Thursday to close at $44.54

This article has been revised to reflect the following correction:

Correction: July 19, 2012

An earlier version of this article misspelled the name of the company that is a part-owner of Verizon Wireless. It is Vodafone, not Vodaphone.