Verizon's profit sinks as it loses wireless subscribers

by Ben Pena April 21, 2017, 17:27

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. With the new Verizon Unlimited 4G LTE data plan, however, those limits were lifted.

Verizon's stock is now down 10% this year while Sprint (S) and T-Mobile (TMUS) are both up.

Total operating revenue dropped to $29.81 billion from $32.17 billion a year earlier.

As growth in the wireless industry began to slow, wireless carriers gave away tablets to juice subscriber metrics.

"Though they lost more than 300,000 customers in the quarter it would have been much worse had they not offered unlimited halfway through the quarter", said Kevin Roe, an analyst at Roe Equity Research LLC. Turns out, it took bringing back truly unlimited data from the dead to step a gush of subscribers from the network. 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. 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.

In February, Verizon announced that it would offer an unlimited data plan for the first time in more than five years.

Verizon's retail postpaid connections base grew 1.2 percent year over year to 108.5 million, and retail prepaid connections grew 0.5 percent to 5.4 million.

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Verizon has explored smaller as well as bigger deals, though nothing has worked out for the company.

After Verizon rolled out its plan, however, it saw 109,000 retail postpaid phone connections, a significant turnaround.

Capital expenditures totalled $3.1 billion in first-quarter 2017, as Verizon carried on spending on its network. Verizon Wireless discovered they absolutely do, as confirmed in the carrier's financial results for Q1 2017, released today. Verizon's main competitor AT&T Inc. plans to diversify its business through an $85.4 billion acquisition of Time Warner Inc. and has already purchased satellite TV company DirecTV.

Verizon Communications (VZ) reported first-quarter earnings and sales on Thursday that missed analysts' expectations, sending shares lower.

Verizon expects improvement in wireless service revenue this year, with total revenue "fairly consistent" with 2016. The telecom company said it added a net of 35,000 Fios internet connections, missing quarterly estimates, and it lost a net of 13,000 Fios video connections for the period.

Payment processing giant Visa said its profit dropped 75 percent in the fiscal second quarter from a year ago, largely due to the costs of integrating its recently acquired Visa Europe into the larger company.


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