Verizon's profit sinks as it loses wireless subscribers
- Author: Wendy Palmer Apr 21, 2017,
Apr 21, 2017, 17:24
Verizon Communications Inc., once the untouchable leader of the US wireless industry, is struggling to hold on to customers and get them to pay a premium for its service.
What makes this news even crazier is the fact that they had to openly admit that it was on track to be even worse had they not introduced Verizon Unlimited, their new unlimited plan. On a non-GAAP basis and excluding revenue from the XO Communications acquisition that closed during the quarter, wireline revenue declined 3.2%.
Verizon's results are not what the majority of analysts predicted for the company. In a recent federal auction of wireless airwaves, T-Mobile emerged as a major beneficiary, spending $8 billion to acquire rights to radio spectrum it will use to expand its mobile internet capacity. So not only did they not gain any, they lost close to 300,000 of their most important customers. "I was happy about it", she said of the price drop.
Industry analysts have questioned whether the company will pursue a more transformative deal as its main competitor AT&T seeks to diversify its business through a planned acquisition of Time Warner. Verizon has also purchased AOL.
Verizon Communications (VZ) reported first-quarter earnings and sales on Thursday that missed analysts' expectations, sending shares lower. Verizon's unlimited plans are more expensive than options from Sprint and T-Mobile, but Verizon has a better network.
The telecom giant's much-talked-about acquisition of Marissa Mayer 's Yahoo (YHOO) is still pending, complicated by the two data breaches that Yahoo announced previous year, which affected up to 1.5 billion users throughout 2013 and 2014.
Verizon's CFO said Thursday that the operator is continuing to spend - on fiber and more - to build "the network of the future", even as its first quarter results show how intense the competition is in the U.S. mobile market.
Can you hear that now, Wall Street? The cheap unlimited T-Mobile One plan that it rolled out previous year has seen T-Mobile poach customers from the other three big mobile carriers. 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.
It's a bit like Verizon's bubble finally popped to start the year. John Legere, T-Mobile's brash CEO, mocked Verizon's results on Twitter.
In the first three months of the year, Verizon lost 307,000 wireless subscribers who are billed each month, the more lucrative kind of wireless customer.
On Thursday, the company predicted its full-year 2017 sales to be "fairly consistent" with those in 2016, with improvements being made in wireless service revenue and equipment revenue trends. However, that stands to leave the firm in a acquainted position: a descending stock price and decelerating progress on the top and bottom lines.
Net income was $3.55bn, a 20 per cent decline from last year's quarter.
Total operating revenue fell to $29.81 billion from $32.17 billion a year earlier.