Verizon’s mobile growth engine revs back up, fueled by the tablet

After a humbling Q1, Verizon(s vz) appears to back on its traditional growth path. It added 1.44 million net new postpaid connections, compared to 539,000 net additions in the first quarter. It even got close to matching the 1.7 million customers brought on board in the final three months of 2013, which is always a huge quarter due to the holidays.
Those subscriber gains helped Verizon post a quarterly profit of $4.21 billion, up 88 percent form the Q1 of 2013, off of operating revenues of $31.5 billion.
As in recent quarters, however, Verizon’s growth was no longer fueled primarily by the smartphone. It sold or activated 8.3 million smartphones in the second quarter, but that resulted only in a net gain of 304,000 new phone connections. Even those low smartphone numbers were a big improvement over Q1, during which Verizon lost about 100,000 phone customers to T-Mobile and other carriers. The remainder of its growth came from 1.15 million new tablets.
Speaking on Verizon’s earnings call, CFO Fran Shammo said the shift to tablets is a welcome one since tablets drive customers to more expensive shared data plans and don’t carry the consumer discounts and subsidy costs of phones. In addition, the more devices a customer adds to an account, the more likely he’ll remain a Verizon customer for the long haul. Connected tablets will be a very profitable segment for Verizon, and it still has plenty of room for growth, Shammo said.
In total, Verizon Wireless now has 104.6 million retail postpaid and prepaid connections, though the vast majority, 98.6 million, are postpaid. On the wireline side, Verizon continued to see more growth in its FiOS group, adding 139,000 new internet customers and 100,000 new TV customers. FiOS now accounts for 75 percent of Verizon Communications’ consumer revenue as DSL continues to fade to the background.