Key Takeaways From Verizon’s Q1 Results

by Trefis Team
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Verizon (NYSE:VZ) published its Q1 2018 results on Tuesday, beating market expectations on revenues and profits, driven by a better than expected performance of its wireless business. Below, we provide some of the key takeaways from the carrier’s results. We have also created an interactive dashboard analysis which outlines our expectations for the company for 2018. You can modify the key drivers to arrive at your own price estimate for Verizon’s stock.

Overview Of Results

Verizon’s wireless business saw its postpaid subscriber base grow by 260k in Q1, driven primarily by the additions of connected devices including smart watches. However, the company lost 24k postpaid phone customers and 75k tablet customers during the period. Smart watch connections are likely to be less lucrative for Verizon, as customers typically pay just about $10 per month, a fraction of what phone customers pay.

Verizon’s wireless service revenues continued to decline, falling by 2.4% year-over-year. This is likely to be due to a continued shift to unsubsidized plans (81% of postpaid base, versus 72% in the year-ago period), which have lower monthly service billings. The carrier’s per account billings also faced some pressure, declining by about 4% on a year-over-year basis to $131.70, as unlimited plans continued to limit overage fees. That said, the company expects to post positive service revenue growth on a reported basis towards the end of this year.

Verizon’s adjusted EBITDA margin for Q1 stood at 35.8%, marking a 70 basis point decline, due to a higher mix of wireless equipment revenue (which has lower margins) and the inclusion of acquired Yahoo businesses in the company’s results for the period. However, margins could improve going forward, driven by service revenue improvements and continued low churn levels. Verizon’s retail postpaid churn declined by 11 bps year-over-year to 1.04% driven by its unlimited plans.

The wireline segment saw revenues decline by 1.8% for the quarter, due to cord cutting and customer attrition for legacy services. While the company’s fiber-based FiOS broadband services gained about 66k Internet customers in the first quarter, it lost 22k video subscribers. The company also continued to witness declines in its traditional broadband and voice services.

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