Verizon Loses Postpaid Wireless Customers for the First Time

By Evan Niu, CFA Markets Fool.com

Telecommunications giant Verizon Communications(NYSE: VZ) reported first-quarter earnings on Monday morning, which included the first time it's ever reported net postpaid wireless subscriber losses. Here's what you need to know about the telecom's first quarter.

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Verizon results: The raw numbers

Metric

Q1 2017

Q1 2016

Year-Over-Year Change

Revenue

$29.8 billion

$32.2 billion

(7.3%)

Net income

$3.6 billion

$4.4 billion

(19.8%)

EPS

$0.84

$1.06

(20.8%)

Total wireless retail connections

113.9 million

112.6 million

1.2%

FiOS internet subscribers

5.7 million

5.5 million

3.3%

Data source: Verizon.

What happened with Verizon this quarter?

Both the wireless and wireline businesses are under pressure, underscoring why the company is openly interested in merger and acquisition possibilities as avenues for growth.

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  • Total wireless retail connections were up modestly year over year, but Verizon said that it lost 324,000 retail connections during the quarter on a sequential basis. That includes 307,000 net subscriber losses in the important postpaid segment, which has long made up Verizon's core wireless customer base.
  • Those customer losses are despite Verizon's relaunch of unlimited data plans. The company said that losses were even worse prior to bringing unlimited data plans back. It had retail postpaid phone net losses of 398,000 prior to launching Verizon Unlimited.
  • Retail postpaid churn also increased by 19 basis points to 1.15%, driven by tablet churn, while retail postpaid phone churn was less than 0.9%.
  • Roughly 72% of postpaid phone customers are on non-subsidized plans as consumers continue shifting toward installment or leasing plans.
  • Wireline revenue declined 0.6% to $7.9 billion. On a non-GAAP basis and excluding revenue from the XO Communications acquisition that closed during the quarter, wireline revenue declined 3.2%.
  • Verizon added 35,000 FiOS internet connections but lost a net 13,000 FiOS Video connections during the quarter.

Verizon's board of directors. Image source: Verizon.

What management had to say

In a statement, CEO Lowell McAdam said:

Our first-quarter results again demonstrated that customers value a high-quality network experience. To build on our loyal customer base and the third-party recognition we have received for network leadership, we extended our wireless and fiber network capabilities, began offering a new unlimited pricing option and expanded our opportunities in new markets. We're executing on strategies to capture future growth and create long-term shareholder value.

Looking forward

In terms of guidance, Verizon expects full-year 2017 revenue to be comparable with 2016, and believes that wireless service revenue and equipment revenue trends will improve. Adjusted EPS should also be "similar to consolidated revenue trends." The company reiterated its capital spending forecast that was provided last quarter, and it should be in the range of $16.8 billion to $17.5 billion. Verizon also said that it remains on track to regain its credit-rating profile (from before buying out Vodafone's stake in 2014) by 2018 to 2019.

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Evan Niu, CFA has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Verizon Communications. The Motley Fool has a disclosure policy.