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After a Good Q1, Verizon Looks to Cut Costs

April 21, 2016 - Written By Alexander Maxham

Verizon reported their Q1 2016 earnings this morning. And posted some pretty good numbers. Bringing in revenues of $22 billion and adding 640,000 customers in the quarter. A bit lower – particularly on the subscriber front – than normal for Verizon. But still pretty good, in the ever increasingly competitive wireless industry. During their earnings call this morning, the company noted their cost cutting efforts in the recent months, and basically pointed at the competitive wireless industry as the reason why. Verizon did mention that their revenues will stabilize once they can get half of their customers onto an installment plan. Which the company believes will happen before the end of the year.

Jefferies analysts had some words about the quarter as well, stating that “service revenue declined 6.2% versus -5.6% in Q4 2015, though management reiterated expectations for service revenue declines to flatten once penetration on unsubsidized pricing reaches 50% (currently 48%)”.

While Verizon’s CFO talked about the company’s cost cutting efforts, which are mostly centered around the wireless business. Shammo stated in the earnings call that they “remain focused on cost reduction throughout the entire business and are making progress in increasing efficiencies, reducing overhead costs, and streamlining support.” Shammo also mentioned that during the fourth quarter of last year they restructured the wireless organization to improve their ability to address the “changing needs of our customers faster and more efficiently.”

Some may wonder why Verizon is looking to cut costs, especially after bringing in $22 billion in revenue in the first quarter. Basically, the company sees the writing on the wall. They see that the wireless industry is getting more and more competitive. While they are still adding a decent amount of customers, they are lower numbers than they were a year ago. So in a sense, Verizon is preparing for what may happen in the near future. This is a good thing for Verizon, so that they won’t end up in debt and needing a buyout from another company. Similar to what Sprint needed with SoftBank.

Verizon is still the largest carrier in the nation, and likely will be for the foreseeable future. But these cost cutting measures are here to make sure that they stay the largest.