Verizon: strong wireless growth, 5G ultra wideband, relaunch of “5G Home” service, much more
Verizon reported Q3 net income of $5.3 billion, compared to $5.6 billion in the year-ago period. Total consolidated revenue came in at $32.89 billion versus $32.61 million a year ago.
The company, which is the #1 U.S. wireless telco (in subscribers) reported strong wireless growth in the third quarter. It added 615,000 postpaid (monthly contract) smartphones in Q3; and signed on 444,000 pay-as-you-go prepaid customers. Wireless revenue for the quarter was $23.6 billion.
CEO Hans Vestberg said on the earnings call:
And as you can see in our operation performance, we had a really good quarter when it comes to wireless additions here, one of the best quarter — third quarter we had in several years.
The company has deployed its 5G Ultra Wideband (its 5G mobile service) in 15 markets and is committed to deploy it in 30 markets by year-end.
Verizon has relaunched its fixed wireless “5G Home” fixed wireless broadband service in Chicago, using the 3GPP 5G New Radio release 15 spec, rather than the Verizon proprietary fixed 5G specification used for the initial launch in October 2018. Verizon said that maximum download speeds via 5G Home remains at 1 Gbit/s, with 300 Mbit/s as the promised minimum speed.
“It’s a new business model,” Verizon CEO Hans Vestberg said on Friday’s call. “Now we have it on the global standard , and now we have it on the self-install.”
Note 1. Once again, Vestberg is confused. 3GPP Release 15 (and any other 3GPP spec) is NOT a standard.
Vestberg on the earnings call:
We’re also doing a lot of things in One Fiber, continue to have a very high pace in that. And that One Fiber is so important for our overall Intelligent Edge Network that we are deploying in the company in order to realize the market-purpose network to gain all the efficiencies and serve our customers even better over time. So in short, a lot of progress in the network.
We continue to deploy also 5G Ultra Wideband in stadiums especially now with NFL, 13 stadiums when the season kicks off having 5G coverage. This is important for us because it’s part of the dense urban areas where you have a lot of viewers at the same time when really our 5G is coming to excel. Because of the 5G build that we’re doing with our assets is — we’re making a real big difference here.
We’re going to launch the first 5G mobile edge compute center in the fourth quarter. (Verizon is) engaging much more with large enterprises because with the 5G platform and 8 currencies, we are now a lot of interactions. We announced in this quarter, for example, collaboration with SAP, Corning. All of them are use cases for the 5G mobile edge compute. So we’re excited all that opportunity we’re creating with the 5G mobile edge compute with the largest companies in the market.
CFO Matt Ellis on Verizon FioS and Business/Enterprise segments:
Fios Internet net additions of 30,000 were relatively flat sequentially and down year-over-year. Fios Video results continued to be impacted by the ongoing shift away from linear video offerings with losses of 67,000. Our customers see value in our high-quality broadband offering paired with multiple choices for video through linear TV bundles or over-the-top options, such as YouTube TV and the recently announced Disney+.
Business wireless volumes remain strong with a 12% increase in gross adds for the quarter primarily within small and medium business and public sector. Postpaid net adds were 408,000 compared to 364,000 in the prior year. This includes 205,000 phones, 112,000 tablets and 91,000 other connected devices. Our continued strong customer loyalty across the Business segment led to phone churn of 0.98%, which is relatively flat sequentially and up slightly over the prior year. Total postpaid churn of 1.22% was up 5 basis points compared to the prior year. Total postpaid device activations were up 5.7% while our retail postpaid upgrade rate was 4.5% versus 4.8% in the prior year.
From a customer group perspective, global enterprise revenues declined 2.4%, driven by legacy pricing pressure and technology shifts. Wholesale revenues declined by 13.7% driven by price compression and volume declines, which we expect to continue in a highly competitive marketplace. Small and medium business revenue increased 6.2% driven by wireless service and Fios growth, partially offset by ongoing declines in traditional data and voice services. Public sector and other revenue increased 1.2% as a result of growth in wireless and wireline products and services.
Vestberg, answering a question from Timothy Horan:
Hans, can you give us maybe some more thoughts what you think people are going to do with gigabit speeds instead of megabits? When we rolled out 4G, we had a lot of new innovative kind of applications. Just any thoughts on that as you’re talking to the Fortune 500 companies. And are there ways for you maybe to participate in some of the revenue from some of these new applications with lower — also maybe lower latency? Just any more thoughts what you’re seeing on use cases.
5G Home is a totally new way how we use the technology, which we have never been able to do before because a stand-alone fixed wireless access can never be sustainable financially. In this case, it is.
Then of course when you think about the 8 currencies coming out from 5G, I think that our conversation with the large enterprises today is a lot about the latency and the mobile edge compute. Because suddenly, you can transform your factory with robotics by having a low latency. You don’t need a wired factory, so the future digital factory will have 5G. We see also much bigger 5G private networks, where you get security much higher because it’s going to be your network. You define your network, you have a compute and storage for your enterprise. This is a new way of charging and actually interacting with our customer. And sometimes, there’s going to be a software in between that come from a software company, so we need to work with them as well.
And as I said earlier, I mean this quarter, we’re going to launch our first 5G mobile edge compute center. So we are on the path of doing this, which actually will add more opportunity. Then on the Consumer side, which usually question starts with, which are now end with because I see so many other opportunities, is of course AR/VR. We see now quite a lot of money coming into the ventures side when it comes to 5G innovation. And I think that as we move into 2020, we’re going to see much more. We have our 5G challenge, which we announced at CES where we had a lot of companies participate what they’re going to do with 5G. It ranged from everything what they can do with 5G.
I think we’re at the moment of 4G, but way bigger. When 4G came, I didn’t know what type of application and new service companies would show up. I think this is far bigger that we’re standing in front of right now, and we have much more insights to it as well.
We close with a Verizon assessment from Phillip Leasure:
Verizon has continued to engage in conservative and well thought out initiates compared to the excitement and drama of its competitors. It has not recently engaged in any historic mergers, it has not made any large corporate purchases to try to move into new sectors and it has fended of lower-priced competitors and continued to add subscribers. It has made smaller investments and purchases designed to strategically enhance the future of the business. It is clearly the market dominator in its sector and for the most part, has continued to focus on its core business and engage in competitive deals with other content creation companies to provide services rather than try to buy out content creators to provide services to their customers. So far this has helped them avoid taking on excessive levels of debt and held margins steady. We’ll see if this continues to be a winning strategy going forward for the top dog of telecommunications.
7 thoughts on “Verizon: strong wireless growth, 5G ultra wideband, relaunch of “5G Home” service, much more”
Verizon announced it is giving customers of its unlimited wireless plan 12 months of Disney Plus for free starting Nov. 12, the launch date for the streaming service. After the promotional period, the subscription for the new streaming service will jump to $6.99.
Vestberg said that the partnership with Disney is another way to drive growth in wireless subscriptions.
“We have a great network and distribution,” Vestberg said, adding that those factors make Verizon a good partner for a popular content provider like Disney. Verizon and Disney each derive benefits from being partners, he said. “Disney Plus is a win-win.”
All of this is an attempt to continue to boost mobile subscriber numbers in the face of stiff competition from rivals, such as AT&T and T-Mobile. Meanwhile, Verizon continues to add 5G in more cities. On Friday, it announced it is turning on its 5G service in two more cities, Dallas and Omaha, bringing its 5G network count to 15.
The addition of these two new cities puts Verizon’s 5G network ahead over some of its rivals. Sprint has nine 5G cities and T-Mobile has six. AT&T is still in the “lead” at 21 total cities, but unlike with the other three carriers, consumers don’t have full access to the network.
Verizon says it plans to have 5G in over 30 cities by the end of 2019.
Analysts at NewStreet Research, in a Friday note to investors, said the carrier’s subscriber additions were solid, but appear “to be driven by increased aggressiveness on the frontbook, with the entry-level Unlimited price cut and continue handset promotions.”
The firm noted that Verizon’s postpaid churn (1.09% and postpaid phone 0.82%) is ticking up, which it called “particularly concerning” given that the industry widely continues to see lower upgrade activity. Still, Verizon has the lowest postpaid phone churn rate among its competitors.
Verizon is also looking to lure more customers with a recently announced promotion that offers unlimited data plan subscribers one free year of Disney’s new Disney+ streaming service. Unlike peer AT&T, Verizon has continued to opt for partnerships in the video space, preferring to act as a distributor, rather than owner, of content.
MoffettNathanson analysts said strategically, the Disney+ deal “puts AT&T in an awful box.” Adding “this seems to be a fight that Verizon can win.”
Why are 3GPP specs not standards?
From the 3GPP website under the heading Official Publications:
The 3GPP Technical Specifications and Technical Reports have, in themselves, no legal standing. They only become “official” when transposed into corresponding publications of the Partner Organizations (or the national / regional standards body acting as publisher for the Partner). At this point, the specifications are referred to as UMTS within ETSI and FOMA within ARIB/TTC.
Some TRs (mainly those with numbers of the form xx.8xx) are not intended for publication, but are retained as internal working documents of 3GPP. Once a Release is frozen (see definition in 3GPP TR 21.900), its specifications are published by the Partners.
Verizon realizes 5G target for 2019:
Verizon announced it has reached its goal of bringing its Ultra Wideband 5G service to 30 cities this year with the addition of select parts of Cincinnati and Columbus, Ohio, along with Hampton Roads, Va., bringing the telecom’s total to 31 markets and 15 pro football stadiums. The rollout of the millimeter-wave based service includes Columbus’ airport and a number of shopping centers in Virginia.
Verizon wants to become the first carrier to use its 5G network to connect 1 million drone flights
Verizon believes drones present a growth opportunity for its budding 5G network and aims to be the first carrier to connect 1 million 5G drones flights. Verizon has targeted drone connectivity since October 2016, when it first announced its intention to sell wireless data plans for the emerging technology.
Just a few months later, the company deepened its commitment to the drones by purchasing drone operation company Skyward. Now, the telecom sees the segment as a potential core revenue stream for its 5G network, which is now available in 31 markets following the launch in April 2019.
A 5G network like Verizon’s can boost the utility of drones in a number of ways:
5G will enable drones to transmit high-definition footage in real-time. 5G’s millisecond latency and data speeds up to 100 times faster than 4G allows drones to transmit high-quality footage to operators on the ground. This enables drones to be used for functions like infrastructure safety inspections, where the drone operator must be able to see patches of rust or smalls cracks, for instance.
Drones with a 5G connection can use AI to more efficiently complete complicated tasks. The ability to quickly transmit data enables drones to be enhanced with AI and outperform drones with a 4G connection. For example, a drone with computer vision can rapidly scan items in a warehouse and recognize patterns, which can improve efficiency and free up human workers to do more complicated tasks.
5G’s low latency will enable precise tracking of drone fleets. As more drones begin to fly, stricter monitoring is needed to ensure they don’t drift into restricted areas or crash, causing property damage or injuries. 5G’s low latency can minimize lag so operators can avoid collisions and better coordinate takeoffs and landings.
Drones present telecoms with a data-intensive application to catalyze subscriptions for their 5G networks. Drone adoption is growing fast among consumers and businesses. In the US alone, the FAA expects almost 800,000 nonmodel aircraft to be registered in 2022, up from 277,000 at the end of 2018 — faster growth than initially anticipated.
Telecoms can take advantage by selling 5G data plans for drones and even forging exclusive deals with drone makers to develop 5G-ready drones, giving customers another way to engage with their 5G networks. Telecoms have been searching for alternative ways to connect users to their networks as global smartphone sales have been stagnating for almost two full years.
Given the significant investment telecoms are making in their 5G networks, providing a diversified pool of potential devices will allow them to capture the largest slice of consumers and more quickly recoup their investments.
From Lightreading on Verizon’s 5G Home (so called 5G FWA):
Verizon’s Ronan Dunne reiterated the company’s ultimate 5G Home deployment goal of covering roughly 30 million American households with the service. And he confirmed that the company expects to reach that goal in the next five to seven years.
Verizon’s initial launch of its 5G Home fixed wireless service in 2018 used the operator’s proprietary 5GTF transmission standard and not the official 3GPP-approved 5G NR transmission standard, Dunne explained in comments this week at the Citi 2020 Global TMT West investor conference.
Verizon relaunched its 5G Home service in late 2019 in Chicago with 5G NR equipment and receiver/routers that customers could install themselves. That kind of do-it-yourself installation helps Verizon sidestep the expense of paying a technician to install 5G Home equipment on the inside or outside of a user’s home or office.
However, Dunne explained that Verizon’s refreshed launch in Chicago isn’t part of a wider expansion of 5G Home — at least, not yet.
He said new, high-powered customer premises equipment (CPE) is scheduled to arrive in the second half of this year, and “that’s really the key.” He said such CPE will be able to receive 5G signals from transmitters that are much further away, thus significantly expanding Verizon’s 5G Home coverage area. He said Verizon’s current 5G Home CPE uses a regular smartphone chipset and “as a result the footprint is significantly smaller.”
When questioned about Verizon’s goal of covering 30 million households — or roughly 23% of the population of the US — with 5G Home, Dunne said it would probably take the operator five to seven years to do so. Dunne’s comments appear to reiterate Verizon’s plans to eventually reach 30 million households with the offering — that’s noteworthy because operator executives appeared to walk back that goal last year. It now appears to be back in the plan.
Dunne said it would take years for Verizon to reach that 30 million deployment goal because the operator is primarily building 5G coverage in dense urban areas that are “low residential.” Meaning, Verizon’s 5G network today mainly functions in downtown urban areas — where Verizon sees the bulk of its mobile customer traffic — instead of the residential and suburban locations where 5G Home makes more sense.
“It’s very much a mobility strategy, with a secondary product of Home, rather than us changing our overarching mobility deployment to try to accelerate Home at the expense of the overall 130 million customer base,” Dunne said.
Archived Jan 7, 2020 webcast from Citi TMT conference: Ronan Dunne, EVP & Group CEO of VZ Consumer, Verizon Communications
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