Verizon has just posted its results for the third quarter of the year, which brought in about 515 retail postpaid net additions, and that included nearly 510,000 postpaid smartphone net adds. Revenue growth on the wireless side was about 6.1-percent, and that excludes the impact of the revenue recognition standard that was adopted beginning January 1, 2018. Verizon notes that service revenue growth was 2.6-percent year-over-year. Customer loyalty was still strong at Verizon, posting retail postpaid phone churn at just 0.80-percent. Wireless revenues were around $23 billion for the quarter, and that’s a 6.5-percent increase year over year. Verizon also noted that around 83-percent of its postpaid phone base was on an unsubsidized plan, versus around 78-percent in the same period last year.
When it comes to the money, Verizon posted $1.19 earnings per share (EPS), and that is compared to the $0.89 it brought in during the same period a year ago. Adjusted EPS (non-GAAP) was $1.22 compared to $0.98 in the year ago period. Verizon’s year-to-date operating cash flow was $26.2 billion and that is an increase of around $9.8 billion year-over-year, with a total debt reduction of around $4.2 billion. That brings the consolidated operating revenues for the third quarter to $32.6 billion, and that’s up 2.8-percent compared to a year ago. This shows that Verizon was able to put together a pretty good quarter, even while it is ramping up spending on its 5G network, which has technically already launched in a couple of markets.
Background: Verizon typically posts some big numbers each quarter, though seeing the majority of its postpaid net additions being smartphones is actually a surprise. This is because the smartphone industry is pretty much at a plateau right now, with carriers not really moving the needle much and customers really just jumping between carriers. But Verizon managed to gain about 510,000 postpaid smartphones out of the 515,000 net adds for the quarter. That is actually rather impressive, and a good move for Verizon. However, Verizon did drop the ball a bit on phone net adds altogether which was 295,000. That means that it lost a pretty big number of prepaid phone users. Though that’s not that surprising, as Verizon isn’t focusing on prepaid, instead focusing on its postpaid customers which bring in more revenue. It did post about 300,000 net adds for other connected devices, which were primarily wearables. On the tablets side, Verizon posted about 80,000 in losses. Not a surprise there either, as tablets by themselves are a dying industry, with virtually the only tablet selling right now being the iPad or Amazon’s Fire tablets.
With Verizon adding more and more connected devices to its network, it means that it is getting its current customers to add more devices. Those connected devices aren’t free either, as they are charged $5 per month, per line for each account. And it’s all part of wireless carriers like Verizon, looking at other ways to grow their customer base, but also grow their revenue. While many are focusing on entertainment, like Verizon’s Go90 that it shut down recently, there is still plenty of room when it comes to hardware, for growth. While AT&T is focusing more on creating content, Verizon is focusing more on its 5G network and delivering content through that network.
Impact: Verizon’s investors seem to be pretty happy with the results that the company released today. As its share price is up about four-percent in intra-day trading. And that is always a good thing for a company. And this is because Verizon actually beat analysts estimates, when it comes to its earnings for the quarter, and that isn’t typically hard to do, but always good to see. Verizon beat on EPS by about three cents, which isn’t a lot, but it was enough to push the stock higher. It also beat in net adds, analysts expected around 161,000 net adds, but it did 295,000 instead, which is another big beat for Verizon. Since it’s a wireless carrier, that is one of the most important metrics for investors, besides the fact that it is bringing in more revenue than it was a year earlier, which it is.
All around, Verizon had a pretty good quarter, and now it is gearing up for its 5G network. It actually already launched Houston, Indianapolis, Los Angeles and Sacramento, through a fixed 5G network. Of course, it’s competitors are saying that it’s not a true 5G network since it’s a fixed network, and because the 5G standards haven’t been finalized yet (and won’t be until around late 2019 or early 2020). Which is true, but it is 5G and its customers are ecstatic about it. It also means that Verizon is going to be spending a lot more on its network in the coming quarters, as it prepares to upgrade to a 5G network nationwide. Verizon stated in its press release today, that it expects its capital spending for 2018 to be between $16.6 and $17.0 billion. It also expects its EPS for the full year to still fall between $0.27 and $0.31. And its effective tax rate for the full year to be at the low end of the 24 to 26 percent range. These are what they call “forward-looking” statements, basically guesses by its accountants based on what they have already spend and made, and what they plan to spend and make in the final quarter of the year. It also lets analysts know what to expect, so that when the company doesn’t hit those numbers, investors will sell the stock and force the stock price lower.
Verizon third quarter was pretty good, for the nation’s largest carrier. We are still waiting to hear from Sprint, AT&T and T-Mobile for the quarter. Which they should all have done pretty decent too, as everyone starts to gear up for the fourth quarter, which is typically the biggest quarter of the year due to the holidays. But churn also tends to jump a bit in the fourth quarter as customers jump between carriers for different deals.