Verizon Wireless 2012 Annual Report Download - page 32

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2012 Compared to 2011
TheincreaseinVerizonWireless’totaloperatingrevenuesduring2012
compared to 2011 was the result of growth in both service and equip-
ment and other revenue.
Accounts and Connections
Retail (non-wholesale)postpaid accounts representretail customers
under contract with Verizon Wireless that are directly served and man-
aged by Verizon Wireless and use its branded services. Accounts include
single connection plans, family plans, Share Everything plans and corpo-
rate accounts. A single account may receive monthly wireless services
foravarietyofconnecteddevices.Retailconnectionsrepresentourretail
customer device connections. Churn is the rate at which service to a con-
nection is terminated.
Retailconnectionsunderanaccountmayincludesmartphones,basic
phones,HomePhoneConnect,HomeFusion,tablets,andotherInternet
devices. We expect to continue to experience retail connection growth
based on the strength of our product offerings and network service
quality.Retailconnectionnetadditionsincreasedduring2012compared
to 2011 primarily due to an increase in retail postpaid and prepaid con-
nection gross additions and improvements in our retail connections
churn rate. Higher retail postpaid connection gross additions during
2012 primarily reflect the launch of our Share Everything plans coupled
with new device introductions during the second half of 2012.
Retail Postpaid Connections per Account
Retailpostpaidconnectionsperaccountiscalculatedbydividingthe
total number of retail postpaid connections by the average number of
retailpostpaidaccountsintheperiod.Retailpostpaidconnectionsper
account increased during 2012 compared to 2011 primarily due to the
increased use of tablets and other Internet devices.
Service Revenue
Service revenue increased during 2012 compared to 2011 primarily
driven by higher retail postpaid service revenue, which increased largely
as a result of an increase in retail postpaid connections of 5.1 million in
2012, as well as the continued increase in penetration of higher priced
smartphones. This increased penetration also contributed to the increase
inourretailpostpaidARPA(theaveragerevenueperaccountfromretail
postpaid accounts).
Theincrease inretail postpaidARPAduring2012 comparedto 2011
was primarily driven by increases in smartphone penetration and retail
postpaid connections per account. During 2012, we experienced a 4.3%
increase in retail postpaid connections per account compared to 2011,
with smartphones representing 58.1% of our retail postpaid phone base
as of December 31, 2012 compared to 43.5% as of December 31, 2011.
The increase in retail postpaid connections per account is primarily due
to increases in Internet data devices, which represented 9.3% of our retail
postpaid connection base as of December 31, 2012 compared to 8.1%
as of December 31, 2011 primarily due to strong sales of tablets and
Jetpacks™.
Other service revenue decreased during 2012 compared to 2011 pri-
marily as a result of a decrease in third party roaming revenue.
Equipment and Other Revenue
Equipment and other revenue increased during 2012 compared to 2011
primarily due to increases in device upgrade fees, regulatory fees and
equipment sales.
2011 Compared to 2010
TheincreaseinVerizonWireless’totaloperatingrevenueduring2011
compared to 2010 was primarily due to growth in both service and
equipment revenue.
Accounts and Connections
Retailconnectionsincreasedduring2011comparedto2010primarily
due to an increase in retail postpaid and prepaid connection gross addi-
tions as well as ongoing improvements in our retail connection churn
rate, both of which we believe were primarily the result of the strength
of the devices in our product portfolio, including the Apple iPhone 4
and 4S, and our line-up of 3G and 4G Android and other 4G LTE capable
devices, as well as the reliability of our network.
Retail Postpaid Connections per Account
Retailpostpaidconnectionsperaccountincreasedduring2011com-
pared to 2010 primarily due to the increased use of tablets and other
Internet devices.
Service Revenue
Service revenue increased during 2011 compared to 2010 primarily
driven by higher retail postpaid service revenue which increased as a
result of an increase in retail postpaid connections of 4.3 million as well
as the continued increase in penetration of higher priced smartphones,
whichalsocontributedtotheincreaseinourretailpostpaidARPA.
Theincreasein retailpostpaidARPAfor2011comparedto2010was
primarily driven by increases in smartphone penetration and in retail
postpaid connections per account. The proportion of our retail postpaid
phone base utilizing smartphones increased to 43.5% as of December
31, 2011 compared to 28.1% as of December 31, 2010 and retail postpaid
connections per account increased by 4.1% during 2011 compared to
2010. The increase in retail postpaid connections per account is primarily
due to increases in Internet data devices, which represented 8.1% of our
retail postpaid connection base as of December 31, 2011 compared to
7.0%asofDecember31,2010primarilyduetostrongsalesofJetpacks.
Other service revenue increased during 2011 compared to 2010 as a
result of year-to-date growth in wholesale and other connections, par-
tially offset by a decrease in third party roaming revenue.
Equipment and Other Revenue
Equipment and other revenue increased during 2011 compared to 2010
due to an increase in the sales volume of smartphones to new and
upgrading customers.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued