Wireline Helps Verizon Offset Wireless Struggles

March 31, 2017 - Written By C H Nguyen

Verizon’s investment in its wireline business may prove to be fruitful at a time when competition in the wireless market is increasing. Although wireline is a smaller business for Verizon, Deutsche Bank called it a bright spot for the nation’s largest wireless carrier. Because of Verizon’s struggles to grow its wireless business, the investment bank expects Verizon to post a -2.2 percent year-over-year growth this year, and the carrier is also expected to lower its earnings per share estimates, primarily due to weaker margins in the wireless business. Most recently, Verizon began offering unlimited data plans again, a move made likely as a response to pressure from rival T-Mobile. Although unlimited data may help Verizon retain subscribers and stem subscriber churn, the carrier may be experiencing some immediate headwind when it comes to profitability. With unlimited data, Verizon won’t generate additional revenue on overages and other fees, for example.

Verizon isn’t the only wireless carrier responding to pressure from rivals T-Mobile and Sprint to offer unlimited data. AT&T also unveiled its own unlimited data plans. Unlimited data and handset promotions were highlighted in the Deutsche Bank report as factors contributing to weaker growth in earnings. Compared to its next largest rival, AT&T, for example, Verizon is more reliant on handset promotions. Instead, AT&T shifted its strategy to focus on services, like DIRECTV and the streaming DIRECTV NOW plans, to grow its wireless business. By bundling these services with its data plans at a discount, AT&T may be able to offer its customers more value.

Verizon is also in the process of reorganizing its business. The carrier announced that it hired former Ericsson CEO Hans Vestberg to lead its new network and technology team, which will be tasked with building out Verizon’s fiber network. Verizon’s investments in its Fios business paid off, and the company reported positive customer growth and a 4.4 percent increase in revenues in the last quarter of 2016. However, despite reporting $2.9 billion in earnings for the quarter, the Fios numbers were still dampened by a loss of 282,000 DSL customers. In addition to the network and technology team, Verizon will focus on its media and telematics business, which is responsible for the digital media business that includes Verizon’s recent acquisition of AOL and Yahoo, and its customer and products operations unit, which will help steer Verizon’s wireless and Enterprise Solutions business.