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Verizon CFO: "We are not going to have any flaws on the execution of the iPhone launch"


Having learned from network and launch issues that AT&T has suffered from in recent years with Apple's iPhone, Verizon executives said Tuesday that they are confident in their ability to handle the launch of the CDMA iPhone 4, citing extensive training, customer service hires and infrastructure investment as ample preparation.

After Verizon posted strong numbers Tuesday, executives suggested that the arrival of the iPhone could help the carrier's growth to "explode." To accomplish this, however, Verizon will need to properly execute the launch of Apple's popular smartphone in order to maintain its advantage over AT&T.

"We are not going to have any flaws on the execution of the iPhone launch," said Chief Financial Officer Francis Shammo. "If we go to customer service, we've hired over 3,000 people currently, who have been trained. And if you think about it, we launched the iPad, so that our customer service reps in our stores and in our centers could get used to the interface of the iPhone, which was a pre-launch to the iPhone. So we've trained everyone, extensive training around that."

In October, reports surfaced that Verizon was hiring hundreds of customer service staff in advance of the launch of the then-rumored Verizon iPhone.

"So if we go to the overall network, we've been preparing the network for expansion for the last year, anticipating the launch of the iPhone," Shammo continued. "So we are well-prepared from a network perspective."

"In 2004, we ushered in the area of mobile data by launching our 3G Wireless network, which made us the largest, most reliable Wireless voice and data network in the U.S," Shammo pointed out. "Now since that time, we've doubled our 3G capacity every year, consistently investing in cell sites, spectrum and backhaul, and increasing our throughput speeds. We've bulked up our 3G capacity again in advance of our iPhone launch."

Shammo's comments could be a competitive jab at AT&T's handling of the iPhone during its four exclusive launches. Last year, a tenfold increase in demand for the iPhone overwhelmed both AT&T's and Apple's servers, bringing preorders of the iPhone 4 to a halt.

Earlier this month, outages on the Verizon website on the day of the Verizon iPhone announcement prompted speculation that the carrier's launch of the smartphone could see a repeat of AT&T's struggles to keep up with demand and increased data traffic.

In order to avoid the network issues for which AT&T has become notorious, Verizon has reallocated billions of dollars from its wireline segment to develop the company's wireless infrastructure. "So if you look at the Wireline segment, our capital expenditures went down by $1.7 billion. That was reallocated back into Wireless. So Wireless increased by $2 billion, which was really the preface of building capacity on EVDO for anticipation of the iPhone usage and building out our LTE network."

Verizon also revealed Tuesday that it had sold over 37,000 stand-alone iPads through December. According to comments by Shammo earlier this month, Verizon will soon sell a CDMA version of the iPad 3G. Currently, Verizon sells the Wi-Fi only iPad bundled with the Verizon MiFi 2200 Intelligent Mobile Hotspot.

In preparation for the expected mass of new customers when the Verizon iPhone launches on Feb. 10, Verizon has changed several of its policies to both ensure profitability and a smooth launch. For example, the company discontinued its "New Every Two" program, which offered phone upgrade credits of up to $100 to subscribers who renewed their contracts.

Additionally, Verizon's return policy has been reduced from 30 days to 14 days, though Shammo asserts that "even at 14 days, it's still one of the best in the industry." Verizon will also soon launch a trade-in program allowing customers to receive credit from a third-party after trading in older devices.

To close out the earnings call, Verizon CEO Ivan Seidenberg reiterated the company's "focus on execution," coupled with a conservative plan for the iPhone 4.

"What we wanted to do with the iPhone in 2011 is pretty simple. So to put this in perspective for those of you who are into conspiracies and into looking for other meaning to life, so you would think that this is my last year, so I would want to make sure that the year went smoothly. I also wanted to make sure my colleagues didn't overpromise and get in the doghouse for the next two or three years. So I've purposely made sure that whatever they told you this morning represented a fairly conservative but doable plan."

Verizon is using a conservative consensus estimate of 11 million iPhones sold in 2011, partly because it is unsure what both supply and demand for the device will be. Even with a conservative estimate, though, the company is bullish about the near-term future.

"So the issue for the iPhone is we don't have all the answers," Seidenberg continued. "We personally believe we'll probably do better than most people think, but we didn't want to set any standard because we don't know the number of people who'll move for it, we're not sure what the inventory flows will be, we're not really sure of how all that will pan out, but we are sure, by the time we get to the end of the year, 2012 will look a lot stronger than 2011."

Seidenberg cautioned investors not too overemphasize the company's iPhone opportunity.

"We also wanted to make sure that when you think about the whole company, you don't just focus on the iPhone, but you look at the breadth of the assets that we have and the opportunities that we have to build the company. Probably the most important issue I'll close on this for 2011 is a lot of stuff written about earnings for 2011, will slide backwards because of the iPhone as opposed to going forward. Hopefully, you got this morning a sense for management that we're not accepting the idea that because we get a new iconic device in the system, that's an excuse for us to reduce our focus on growing the base in 2011."