Holiday sales of the iPhone 4S started to boost revenue at Verizon Communications Inc. in the latest quarter, as subscribers settled in to paying their new monthly bills.
That meant that wireless service revenues grew at their fastest pace in three years at Verizon Wireless. The country's largest cellphone company started selling the iPhone 4 a bit more than a year ago, but sales got a big boost when the 4S model was released in October.
IPhone sales don't boost the results of a cellphone company immediately, because the companies subsidize them by hundreds of dollars to be able to sell the phone for $99 or $199. They then count on making the money back in service fees over a two-year contract.
At Verizon Wireless, the iPhone effect was clear in Thursday's first-quarter report: The average monthly bill for subscribers on contract-based plans was $55.43, up 3.6 percent from a year ago. A few years ago, monthly fees were stagnant at Verizon.
However, the high price of the iPhone means phone companies are struggling to make it pay -- most of the profit from the iPhone is flowing to Apple Inc., not the phone companies. Verizon Wireless recently introduced a $30 "upgrade fee" for existing customers trading up to a new phone.
Verizon's overall net income was $1.69 billion, or 59 cents per share, in the first three months of 2012, beating the average forecast of analysts by a penny per share. It was up from $1.44 billion, or 51 cents per share, a year ago.
Revenue rose 4.6 percent to $28.2 billion from $27 billion a year ago, matching expectations.
On the landline side, revenue continued to decline slowly as customers continue to cancel their phone and DSL lines. Verizon's cablelike FiOS service continued to attract customers, and Chief Financial Officer Fran Shammo said the company would stop selling DSL Internet service in areas where FiOS is available. DSL is slightly cheaper than FiOS Internet service, but much slower.