Key Metrics To Watch As Verizon Reports Q4 Earnings

Verizon (NYSE:VZ) is set to publish its Q4 2015 earnings on Thursday, January 21, reporting on another quarter that saw significant promotional activity by its smaller rivals who are looking to court an increasingly limited number of new customers in a mature U.S. wireless market. ^[1] We will be watching two key metrics to see how the carrier is faring in the increasingly competitive and saturated market – namely wireless postpaid churn and postpaid subscriber adds.

We have a price estimate of $56 for Verizon’s stock, which roughly 25% ahead of the market price.

See our complete analysis for Verizon

Postpaid Metrics In Focus

Subscriber growth –particularly postpaid phone subscriber growth – is perhaps the most important metric for comparing the performance of wireless players. While T-mobile led the industry in terms of postpaid adds in 2015, adding a net of 3.2 million postpaid subscribers and 2.6 million postpaid phone subscribers between January and September, Verizon performed fairly well. The carrier’s solid network performance and coverage enabled it to add a total of 3 million retail postpaid customers.  During the third quarter, Verizon posted 430,000 postpaid phone net additions and 818,000 tablet net additions, which are less lucrative. It will be interesting to see how the number trends in Q4, as Sprint – the smallest of the four national carriers – has been ramping up promotional activity, while posting its first set of quarterly net postpaid subscriber adds in more than two years during Q3, in a development that could reduce the supply of customers for Verizon. (related: The U.S. Wireless Industry: 2015 In Review)

Will Churn Numbers Continue To Improve ?

Verizon’s churn metrics should remain strong driven by its inherent network advantage, quality customer base as well as a trend towards adding more devices to a postpaid wireless plan, which makes customers less likely to switch operators. During Q3, the carrier’s retail postpaid churn stood at 0.93%, marking a year-over-year improvement of 7 basis points, indicating that the carrier has been able to insulate itself from the aggressive device and service offers that smaller rivals have been promoting in recent months. Better churn figures typically improve wireless margins, since it helps to rein in customer acquisition and marketing costs. During Q3, Verizon’s margins rose by about 1.6% year-over-year to 43.2%, likely driven by improving churn and the growing base of 4G users (76% of its postpaid base was on 4G smartphones). ^[2]

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1. Verizon Press Release [↩]
2. 3Q 2015 Quarter Earnings Conference Call Webcast, Verizon, October 2015 [↩]