What Is The One Risk Every Verizon Investor Should Know?
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Verizon Communications (VZ) stock returned 25.2% over the past year, against 14.9% for the S&P 500.
On its October 26 call, management said the company had stopped losing market share. The stock price appears to assume Verizon keeps its customers and keeps growing service revenue, which requires a network rivals cannot easily copy. A question on that call raised a possible newcomer to mobile. Who is it, and how soon could it arrive?
Could SpaceX Go After Verizon’s Phone Customers?
SpaceX could try, but management estimates that a satellite network capable of matching Verizon’s is years away. Since the call, Reuters reported on November 2 that SpaceX is in talks to buy EchoStar’s Boost Mobile or gain access to its network. The question of a satellite company entering Verizon’s core mobile business came up on the October 26 call, and management took it seriously: it said it assumes that everything SpaceX says it will do, it will do, and flawlessly.
Management said a satellite newcomer would need a large amount of spectrum, the airwaves a mobile network runs on. It estimated that a full build-out would take a minimum of four to six years and cost somewhere between $300 billion and $500 billion over the next seven or eight years.
Management also sees no reason to give a newcomer a shortcut through Verizon’s own network. It said there are no back doors in its wholesale agreements, under which other brands sell mobile service on Verizon’s network, and that it sees no benefit in extending such a deal to any satellite provider.
Verizon Earns Most Of Its Revenue From Wireless Service
A satellite rival would compete for wireless service, which made up about 61% of Verizon’s third-quarter revenue. Management said Verizon’s wireless service revenue reached just over $20.9 billion that quarter, out of total revenue of $34.3 billion.
Service revenue across mobile and broadband together is still growing, and a little faster than before. Management said mobility and broadband service revenue grew 2.9% in the third quarter, up from 2.8% in the second quarter. Management expects about 4% in the fourth quarter, a forecast rather than a result.
The stock price appears to assume steady growth rather than fast growth. Verizon trades at 11.7 times its last twelve months of earnings, about half the S&P 500’s 22.8. Its P/E at the end of September 2026 sat near the middle of Verizon’s own past: at 21 of the 40 quarter ends since the end of 2016, the P/E was lower than it was then. On November 4, the shares closed 8.9% below their highest close of the past 365 days, reached on September 15, so they have given back part of the past year’s gain.
How Worried Should Verizon Shareholders Be?
A satellite rival is the risk to know, but it is a slow one. The nearer worry is whether Verizon holds on to the customers it has just added.
Those gains are recent. Management said Verizon added 406,000 postpaid phone customers, net of those who left, in the third quarter, its strongest third quarter in five years. Management said churn, the share of customers who leave, rose in every quarter last year. In the third quarter, churn among postpaid phone customers, those who pay a monthly bill, was 94 basis points, four basis points better than a year earlier. Postpaid phone churn is the number to watch when Verizon next reports, expected in January 2027.
Beyond VZ: A Systematic Way To Invest
Before you decide on VZ, consider a better choice. Since its September 2020 launch, the Trefis High Quality (HQ) Portfolio has returned 105%, ahead of a benchmark that combines the S&P 500, S&P MidCap and Russell 2000, without betting on one stock.
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