Verizon’s Wireless Operations Perform Well As Internet Business Struggles
Verizon (NYSE:VZ) published a better than expected set of third-quarter results that were driven by the company’s expanding postpaid wireless business. While total revenues grew by 2.8% year-over-year to $32.6 billion, EPS grew by about 34% to $1.22. Below, we take a look at some of the key trends that drove the company’s performance over the quarter. We have created an interactive dashboard analysis which outlines our expectations for Verizon’s performance over 2018. You can modify any of our key drivers and forecasts to gauge the impact of changes on the company’s bottom line.
Postpaid Business Performs Well
Verizon’s postpaid phone additions came in at 295k, marking a strong increase over the year-ago period. The increase was driven primarily by equipment promotions on Apple’s new iPhones and also by continued strong uptake for the company’s unlimited data plans. Earlier this year, Verizon launched its mix and match plans, which allow users to choose different unlimited tiers for each line of their family plans. While the carrier’s retail postpaid churn remains among the best in the industry, it saw a slight increase year-over-year to 1.04% due to higher competition in the market. However, the number should settle down in the longer-run, driven by a larger number of devices, such as the Apple Watch LTE, on its plans.
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Commercial 5G Rollout Updates
Unlike its wireless rivals, Verizon has been largely staying away from high-profile deal-making activity of late, choosing to focus on improving on wireless network. Earlier this month, the carrier rolled out its first commercial 5G installations targeted at residential users in four U.S. cities, with a larger scale rollout planned over 2019. While the service is likely to remain relatively niche until more mainstream mobile-focused deployments begin, the company should gain insights ahead of the broader industry, enabling it to refine its networks and customer experience ahead of rivals. Verizon indicated that 5G could have an impact on its consolidated results from 2020 onwards.
Internet Business Struggles
Revenues from the digital media business Oath, which Verizon has been building via its acquisitions of AOL and Yahoo, fell by about 7% year-over-year, as sales from search and desktop traffic declined, more than offsetting growth in the video and mobile space. The outlook for the business also remained tough, with Verizon indicating that revenues could remain flat over the near term. Management also added that it was unlikely to meet its target of $10 billion in revenues from the segment by 2020, as search and desktop products, which are currently facing headwinds, account for a bulk of the company’s sales.
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