Verizon’s Q1 Profit Beats Estimates on Sales of Smartphone

Verizon Communications Inc. (VZ), the second-largest U.S. phone company, posted earnings that beat analysts’ estimates as Smartphone demand boosted subscriber count and slowing sales of Apple’s iPhone helped margins. 

First-quarter earnings raised to 59 cents a share from 51 cents a year earlier, New York-based Verizon said today in a statement.

Verizon Wireless added 501,000 contract customers.

Verizon Wireless, the largest U.S. wireless carrier, is gaining users even as the market nears saturation. Wireless penetration in the U.S. is 105 % when including mobile devices like tablet computers, said Bob Roche, a statistician with CTIA, a wireless industry trade group.

First-quarter net income rose 17 % to $1.69 billion from $1.44 billion a year earlier.

Verizon -which co-owns its wireless business with Vodafone Group Plc (VOD)- retreated 0.2 % to $37.66 yesterday.

The slowing market is forcing Verizon Wireless into more intense competition with AT&T Inc. and Sprint Nextel Corp., with the carriers trying to attract customers with price promotions, faster network speeds and device such as the iPhone, as Bloomberg stated.

New sales of the Apple device hurt carriers’ profit margins initially, because they sell the phone at a loss to lure subscribers into two-year contracts. Users of iPhone and other smartphones are lucrative because they spend more each month browsing the Web, sending e-mail and watching video.

Carriers are trying to fuel the use of such services, as the stagnating market forces them to try to squeeze more revenue out of existing subscribers. Average monthly revenue from