Verizon's Q3 2016 Net Adds Miss Analysts Expectations

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On Thursday, Verizon announced their earnings for the third quarter, and they were a bit disappointing. Verizon did add some new postpaid users, but they added far fewer than analysts had expected them to add in the quarter. Analysts were expecting around 766,300 net adds, but Verizon only had 442,000. Verizon as a whole, saw a revenue decline of 6.7% compared with the previous quarter. Dropping from $33.16 billion to $30.94 billion in the quarter. this also missed analysts expectations of $31.14 billion.

When it comes to Verizon's wireless business, the company finished the quarter with 113.7 million retail connections. Which is a 2.6% increase year-over-year. Their postpaid connections base grew 3% to 108.2 million. On the prepaid side of things, those connections are 5.5 million, as of the end of the third quarter. 357,000 4G LTE smartphones were activated in the quarter, tablet net ads were 221,000 and other postpaid net additions were 257,000. The wireless business saw revenues of $22.1 billion for the third quarter. Also a decline, but not as steep as Verizon as a whole. That's a 3.9% drop year-over-year. They did note that device payment plan billings (i.e. Verizon Edge) increased 2.3% in the quarter, to $19.3 billion. As such, Verizon attributes their decrease in revenue to the fact that more and more customers are opting for unsubsidized smartphones. Verizon now has 35.8 million device payment plan phone connections. That is roughly 41% of the postpaid phone base. About 70% of phones activated in the quarter were on payment plans as well. They expect that by the end of the fourth quarter, about 70% of their postpaid phone base to be on unsubsidized pricing.

Other numbers in this release, as it relates to Verizon Wireless, include Segment operating income of $7.6 billion, margin was 34.6% for the quarter. Segment EBITDA was $9.9 billion for the quarter which is a 0.1% increase year-over-year. The carrier is also touting that customer loyalty remained high in the quarter, with postpaid churn sitting at just 1.04%, that's an increase of 11 basis points over the same period last year. They mentioned that the strong retention in their phone customers offset the increase churn in the tablet space.

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Not the best quarter for Verizon, they could have definitely have done better. But it is clear that they are beginning to really feel the heat from the price war that the smaller carriers – T-Mobile and Sprint – have been engaging in for the last few years.