Verizon Q1 earnings beat; loses postpaid phone & Fios TV subs, adds Fios internet subs; 5G & fiber build-out on track
Verizon lost 68,000 postpaid phone connections during the first three months of the year, compared with a net loss of 44,000 such connections during the same period a year earlier. Retail store closures led to a “significant drop” in customer activity, the company said. Postpaid phone customers are considered lucrative because they typically pay bills monthly under longer-term contracts and are less likely to switch carriers. In sharp contrast, AT&T added 163,000 postpaid phone subscribers during the first quarter.
Total revenues for wireless products and services was essentially flat, seeing just a 0.5% decrease year-over-year to $22.6 billion. While wireless service revenue grew in both the consumer and business segments, Verizon said, that growth was countered by sharp reductions in equipment revenue because in-store customer engagement was limited by social distancing measures. Consolidated operating revenues for the company were down 1.6% to $31.6 billion.
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The largest U.S. wireless carrier by subscribers tempered its financial forecasts for the rest of the year, lowering its profit goals (see Matt Ellis’ remarks below) and withdrawing its revenue targets. In the first quarter, the company reported a slight drop in wireless subscribers as gains in business accounts were offset by a steep decline in new consumer accounts.
Verizon increased its bad-debt reserve by $228 million based on the number of customers it expected won’t be able to pay their bills. It and other carriers signed a pledge with the Federal Communications Commission not to cut off service for 60 days or charge late fees to consumers facing pandemic-related hardships.
“We were in a position of not really having any idea what the impact of the social distancing and shelter-in-place would [be],” said Matt Ellis, Verizon’s chief financial officer. Verizon hasn’t disclosed how many customers have stopped paying, but Mr. Ellis said many consumers continue to pay their wireless bill even when they can’t pay their car loans or mortgages.
Verizon’s Progress towards their 2020 Goals:
Strengthen & Grow Core Business
•Driving digital sales through enhanced experiences
•Strengthened mmWave spectrum holdings through Auction 103
Leverage Assets to Drive New Growth
•34 Ultra wideband cities live; 5G network build on plan
•BlueJeans acquisition announced in April expands portfolio
Drive Financial Discipline & Strength in Balance Sheet
•Disciplined spend with focus on operational efficiencies
•Scenario planning to navigate uncertainties
Infuse a Purpose-Driven Culture
•Continuing initiatives to drive meaningful difference to society
•Leading brand perception related to COVID-19 response
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CEO Hans Vestberg (English grammar is not very good and not corrected here) talked up VZ’s 5G and fiber plans on today’s earnings call:
When it comes to leverage our assets and we’re growing in the future our 5G plans and our fiber plans the build out of that are on plan. We were also a little bit ahead of plan when we ended the first quarter. And can I report still today we are on plan with the 5G and fiber. Of course, our challenge is out there when it comes to COVID-19 and so on.
But our team are finding new ways and innovative ways to actually do the deployment. There are ways of dealing with approvals from the municipalities set by new ways. And we have great collaborations from many of the municipalities to do it. There might be problems going forward but I am also confident that my team are very innovative in the field and see that we continue to drive hard on this.The 5G is still very much in the middle the center of our strategy. And as you heard me saying before we’re in the middle of the execution and we’re not halting that. We’re keeping it up all the time and the team is doing great work there. And we see opportunity with 5G going forward both with building all the cities, the 5G mobile edge compute as well as making this nationwide 5G still this year.
On top of that we increased the CapEx guidance in the quarter because we felt that it was a good time for us to continue to see that we have robust networks as we went into a moment in time we don’t really know how the network would be used. At the same time of course sending a message that we think is a good return on investment on that incremental CapEx.
Editor’s Note: We find it beyond unbelievable that Verizon is such a 5G cheerleader, especially CEO Hans Vestberg, when the company is not even a member of 3GPP and doesn’t attend 3GPP (5G architecture and 5G core) or ITU-R WP5D meetings where IMT 2020 radio aspects (RIT/SRIT) are being standardized. Yet their U.S. network provider competitors are all 3GPP members and attend 3GPP as well as ITU meetings. The competitor list includes AT&T, T-Mobile, Dish, Comcast, Charter, C-Spire, and other network service providers.
Verizon CFO Matt Ellis said:
For adjusted EPS, we are revising our original guidance of 2% to 4% growth and are now guiding to a range of negative 2% to positive 2% change from the prior year. Our new estimated range is based on a scenario that assumes significant headwinds prevail throughout the second quarter.
We have limited visibility into the second half of the year, which will depend on various potential operating environments. We will continue to assess the impact of COVID on our business, including our bad debt reserve and expect to provide an update on our next earnings call based on how things develop between now and then.
You can watch Verizon’s earnings call webcast here.
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References:
https://www.verizon.com/about/investors/quarterly-reports/1q-2020-earnings-conference-call-webcast
https://www.wsj.com/articles/verizons-wireless-business-slowed-by-coronavirus-11587730044
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