Verizon Communications (NYSE: VZ), the second-largest U.S. phone company, reported first-quarter profit that beat estimates after attracting more wireless customers and getting them to sign up for lucrative data contracts.

Earnings rose to 68 cents a share in the period, the New York-based company said today in a statement. Analysts had estimated about 65 cents on average, according to data compiled by Bloomberg.

Verizon Wireless, the company’s mobile-phone business, added 677,000 monthly contract users. Wall Street was projecting 629,000, according to a Bloomberg survey of nine analysts. The company said more than 61 percent of its subscribers now own smartphones such as Apple Inc.’s iPhone, meaning they typically use more data — and pay higher bills. Verizon also has the industry’s most extensive network using a technology called long-term evolution, or LTE.

“It’s a simple formula that’s hard to beat: Verizon sells itself as the best network at the best price,” Gerard Hallaren, an analyst with Janco Partners Inc., said in an interview before the earnings report.

Verizon shares rose as much as 2.1 percent to $50.60 in early trading after the closing Wednesday at $49.54 in New York. The stock had climbed 14 percent this year through yesterday.

Subsidy Changes

While adding smartphone customers bolsters revenue in the long run, it can take a toll on short-term profit. That’s because carriers offer deep subsidies on the devices in return for a two-year contract. To mitigate the impact of the discounts, Verizon changed its eligibility requirements last week so that customers have to wait 24 months to get new subsidies, rather than 20.

Smartphone customers use the devices to surf the Web, watch videos and stream music, so their data consumption is higher and they pay bigger monthly bills than buyers of regular mobile phones. Verizon’s average monthly bill for contract users was $150.27, topping the $149.01 analyst had predicted on average.

Verizon’s first-quarter sales climbed 4.2 percent to $29.4 billion, just shy of the $29.5 billion estimated by analysts. Net income attributable to Verizon rose 16 percent to $1.95 billion, or 68 cents a share, from $1.69 billion, or 59 cents, a year earlier.

Verizon Wireless, co-owned by Vodafone Group Plc, is luring more smartphone users with its speedier LTE network. The company has LTE in more than 400 towns and cities and a one-year lead over AT&T Inc., its biggest rival, in network upgrades. Both AT&T and

Verizon have targeted heavy wireless-Internet users with new data-share plans, introduced last year. Verizon Wireless lets customers share a data plan between as many as 10 devices.

The increase in wireless sales helped compensate for a 1.2 decline in revenue from landline customers. One of the relative bright spots of that business is Verizon’s FiOS fiber-optic service, which added 188,000 Internet customers and 169,000 TV customers.

“The wire-line side has always been weak, but FiOS is the saving grace,” Hallaren said.