Verizon's profit sinks as it loses wireless subscribers
Apr 21 2017 by Johnny Bowman
Verizon Communications Inc., once the untouchable leader of the USA wireless industry, is struggling to hold on to customers and get them to pay a premium for its service. T-Mobile is for the most part responsible for the return of unlimited data plans to the United States mobile market, as T-Mobile's popular unlimited plan practically forced Verizon to follow suit and make its own.
The company has also pursued revenue streams outside its core wireless business.
"They badly missed on every important subscriber metric, and it just underscores that the wireless business is a severely growth-challenged business at the moment", said Craig Moffett, an analyst at MoffettNathanson in an interview.
But analysts viewed the results as disappointing. Wireless bills are a major household expense, and their continued decline had a big impact on March's surprising 0.3% drop in the consumer-price index. Total wireless revenue of $20.9 billion was short of the $21.1 billion predicted by Wells Fargo, and wireless service revenue of $15.8 billion was down 6.1% year over year, missing Wells Fargo's estimate of $16 billion.
The stock closed down more than 1 percent on Thursday. It means "more gas in my vehicle". AT&T has purchased satellite TV company DirecTV and is trying to buy Time Warner, the entertainment conglomerate behind CNN, TBS and HBO. But Verizon doubled down in 2014 with its $130 billion purchase of Vodafone Group PLC's 45% stake in their Verizon Wireless joint venture.
On Thursday, Chief Financial Officer Matthew Ellis clarified the comments, saying that while the company would consider deals that are in the interest of shareholders, it is confident in its assets.
More Verizon customers used the unlimited plan to reduce their bills - moving from expensive data plans to the cheaper unlimited one - than customers chose to pay up. During the same period in the previous year, the firm earned $1.06 EPS. Long-term, the shift to unlimited is likely to hurt Verizon's profits, as it's simply less profitable to sell an unlimited data plan for $80 than it is to sell 10GB of data for $140.
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Can you hear that now, Wall Street? The stock has fallen more than 8 percent since the beginning of the year.
1 U.S. wireless carrier, reported a 20 per cent fall in quarterly profit as it lost wireless postpaid subscribers despite the re-launch of unlimited data plans.
Last year, T-Mobile gained 3.3 million of the lucrative phone customers - "post-paid" in industry jargon - while Sprint gained 910,000, according to MoffettNathanson.
Before the launch of its "Verizon Unlimited" plans in mid-February, Verizon had a retail postpaid phone net loss of 398,000; after the launch, Verizon said it added 109,000 retail postpaid phone connections. On T-Mobile, the potential throttle point is 30GB. Verizon's rivals are slated to report their latest results in coming weeks.
Those customer losses are despite Verizon's relaunch of unlimited data plans. But that stands to leave Verizon in a familiar position: slowing growth on the top and bottom lines, and a sliding stock price. Excluding items, earnings per share was 95 cents.
Verizon's total operating revenues, including wireline services, were $29.8 billion in the first quarter, a decrease of 7.3 percent year-over-year.
According to Thomson Reuters I/B/E/S, analysts had expected adjusted earnings per share of 99 cents and revenue of US$30.77 billion.