Key Metrics To Watch As Verizon Reports Q3 Results

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Verizon (NYSE:VZ) is expected to publish its Q3 2017 earnings on October 19, reporting on a quarter that is likely to have seen the company continue to add postpaid phone subscribers, driven by its unlimited postpaid wireless offerings. Below we take a look at some of the key metrics to watch in the carriers wireless division as it reports results.

We have a price estimate of $53 for Verizon’s stock, which is about 10% ahead of the current market price.

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Postpaid Phone Growth Could Continue, Churn Should Remain Low

Verizon bowed to competitive pressure from T-Mobile and Sprint, reintroducing its unlimited data plans earlier this year. The plan saw a strong uptake, helping the carrier add 358k postpaid phone subscribers over Q2 – its first full quarter of availability. In August, Verizon tweaked its unlimited offerings, likely due to network congestion, offering three separate plans priced of $75 onwards, while also putting caps on video resolution and introducing stricter throttling policies. (related: Why Verizon Had To Rethink Its Unlimited Strategy) That said, we do not expect this to significantly impact Verizon’s net additions for the quarter, as this has been a trend across the broader industry.

Verizon has been able to keep its churn figures low in recent quarters (postpaid churn of 0.94% in Q2), despite significant competition and its comparatively higher pricing as its subscribers appear to be willing to pay a premium for its stronger network performance and coverage. While Q3 saw the launch of two new flagship handsets – the iPhone 8 and Samsung Note 8 – we do not think they will impact churn rates in the industry, as carriers have been quite circumspect about their device promos this year. (related: Carriers Could Be More Cautious About Promos For iPhone 8)

ARPU In Focus

Another metric that we will be watching closely is Verizon’s ARPU. Unlimited plans effectively put a ceiling on revenues from high-spending subscribers who were previously on more expensive tiered plans, while limiting lucrative overage fees that are charged after customers exceed their monthly data quotas. Verizon’s average revenues per account over Q2, including equipment installment plan billings, fell by 1.5% year-over-year, while service revenues were down 6.7% to $15.6 billion. That said, there is a possibility that Verizon could partially offset this impact as more lower-ARPU subscribers upgrade to its unlimited offerings.

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