Verizon Wireless 2009 Annual Report Download - page 24

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Management’s Discussion and Analysis
of Financial Condition and Results of Operations continued
Domestic Wireless’s total operating revenue during 2009 increased by
$12,799 million, or 25.9%, compared to 2008, primarily due to the inclu-
sion of the operating results of Alltel, as well as growth in our service
revenue from sources other than the acquisition of Alltel.
Service revenue
Service revenue in 2009 increased by $10,862 million, or 25.5%, compared
to 2008, primarily due to the inclusion of service revenue as a result of
the 13.2 million net new customers, after conforming adjustments, which
we acquired in connection with the acquisition of Alltel. Since January 1,
2009, service revenue also increased as a result of a 5.9 million, or 8.2%,
increase in total customers from sources other than customer acquisi-
tions, as well as continued growth from data services.
Excluding retail customer acquisitions, Domestic Wireless added 4.6 million
net retail customers during 2009, compared to approximately 5.8 million
in 2008. The decline in net retail customer additions for 2009 was due to
an increase in churn, compared to 2008, partially offset by an increase in
gross customer additions due to the expansion of our sales and distribu-
tion channels as a result of the acquisition of Alltel. Excluding customer
acquisitions, Domestic Wireless added approximately 5.9 million net total
customers in 2009, compared to approximately 5.8 million in 2008. The
increase in net total customer additions for 2009 was due to an increase in
gross customer additions from our reseller channels, primarily during the
fourth quarter of 2009, partially offset by the above mentioned changes
in net retail customer additions. The increases in our total and retail post-
paid churn rates were primarily a result of increased disconnections of
Mobile Broadband service and business share lines, which we believe are
primarily attributable to current economic conditions.
Total data revenue was $16,014 million and accounted for 29.9% of service
revenue in 2009, compared to $10,651 million and 25.0%, respectively, in
2008. Total data revenue continues to increase as a result of increased
use of Mobile Broadband, e-mail and messaging. We expect that data
revenue will continue to increase as a result of recent strong sales of 3G
smartphone devices and continued introductions of new data-capable
3G smartphone and multimedia devices.
The declines in service ARPU and retail service ARPU were due to the
inclusion of customers acquired in connection with the acquisition of
Alltel, as well as continued reductions in voice ARPU, partially offset by an
increase in total data ARPU. Total voice ARPU declined $3.13, or 8.1%, in
2009, compared to 2008, due to the on-going impact of bundled plans
and increases in the proportion of customers on our Family Share plans
as customers seek to optimize the value of our offerings. Total data ARPU
increased by $2.31, or 17.9%, in 2009, compared to 2008, as a result of the
increased usage of our data services.
Domestic Wireless’s total operating revenue increased by $5,450 mil-
lion, or 12.4%, in 2008 compared to 2007, primarily due to continued
strong growth in service revenue. Service revenue during 2008 increased
by $4,619 million, or 12.2%, compared to 2007, primarily caused by an
increase in data revenue in 2008 compared to 2007, and a 6.3 million or
9.7% increase in total customers in 2008.
Excluding retail customer acquisitions, Domestic Wireless added
approximately 5.8 million net retail customers during 2008, compared
to approximately 6.9 million during 2007. On the same basis, Domestic
Wireless added approximately 5.8 million net total customers during
2008, compared to approximately 6.6 million during 2007. The declines
in both net retail customer additions and net total customer additions in
2008 compared to 2007 were due to an increase in our churn, partially
offset by a slight increase in gross customer additions. The increases in
both total and retail postpaid churn rates were primarily a result of cus-
tomer-favorable policy changes which removed barriers to early contract
termination and an increase in the rate of disconnections for our Mobile
Broadband service.
Total data revenue was $10,651 million and accounted for 25.0% of ser-
vice revenue in 2008, compared to $7,386 million and 19.4%, respectively,
in 2007 as a result of the continued increase in the number of customers
using our data services, as well as increased usage of our messaging ser-
vices and non-messaging services, such as Mobile Broadband, e-mail, data
transport and newer location-based data services such as VZ Navigator.
The increases in service ARPU and retail service ARPU in 2008 compared
to 2007 were primarily due to an increase of 30.2% in total data ARPU
as a result of the increased usage of our data services, partially offset by
continued dilution of voice ARPU.
Customer acquisitions during 2008 included approximately 650,000 net
total customer additions, after conforming adjustments, acquired from
Rural Cellular Corporation (Rural Cellular). As a result of an exchange with
AT&T consummated on December 22, 2008, Domestic Wireless trans-
ferred a net of approximately 122,000 total customers.
Equipment and Other Revenue
Equipment and other revenue in 2009 increased by $1,937 million, or
28.9%, compared to 2008 primarily due to an increase in the number of
both data and phone equipment units sold, partially offset by a decrease
in the average revenue per unit. The increase in the number of equipment
units sold was a result of both the increase in gross customer additions
as well as an increase in the number of units sold to existing customers
upgrading their wireless devices. Other revenues increased primarily due
to the inclusion of the operating results of Alltel and an increase in our
cost recovery rate.
Equipment and other revenue in 2008 increased by $831 million, or 14.2%,
compared to 2007, primarily as a result of an increase in the number of
upgrades for data devices combined with higher average equipment
revenue per device for phone devices, partially offset by lower average
equipment revenue per device for data devices sold through our direct
channel, in part driven by promotions during 2008. Other revenue also
increased because of increased cost recovery surcharges and regula-
tory fees, as a result of the increase in customer base combined with an
increase in our cost recovery rate.