Gains in new cellular subscribers and service revenue at Verizon Wireless overshadowed losses in cable customers and desktop advertising in the first quarter, leading to better-than-expected earnings at the telecommunications giant.
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The discrepancy highlights the focus for the New York City-based company on launching a national fifth-generation wireless network, which promises ultra-fast speeds with lower latency than the prior 4G LTE network.
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Verizon previously initiated 5G service in Chicago and Minneapolis, though some initial reviews indicated difficulty in achieving the promised speeds. In response to the criticism, CEO Hans Vestberg said the results "meets our expectations."
"We see of course an opportunity when you are early in the customer experience like 5G you have a chance…to grow with subscribers," he told investors. "We have much more to come out."
The company plans to launch the offering in 30 cities by the end of 2019.
On Tuesday, Verizon touted its first-quarter earnings as the first in the launch of the 5G mobility era.
“Our ambition remains unchanged to provide the most advanced next-generation networks in the world,” Vestberg said in a statement.
The company reported revenue of $31.2 billion, a 1.1 percent year-over-year increase and in-line with analyst expectations. Profits were $5.2 billion, or $1.22 per share, higher than Wall Street estimates.
Verizon added 174,000 postpaid wireless customers, a key growth metric in the industry that tracks users who pay a monthly bill. Still, the company also lost 44,000 phone users as it ended some promotional deals amid the shift to 5G.
Service revenue grew 4.4 percent as more customers opt for higher-priced plans, specifically unlimited data plans and additional connections per account. Verizon expects the upgrade opportunity to continue to drive earnings, given that unlimited subscriptions account for "less than 50 percent of our total connections," CFO Matthew Ellis told investors.
Those gains were offset by a $1.8 billion decrease in earnings at Verizon Media, which includes Yahoo, The Huffington Post and TechCrunch, due to decreased desktop advertising revenue. Cable service Fios lost 53,000 customers in the first quarter as more customer shifted to online streaming platforms.
While Verizon also plans to launch an online streaming service like rival AT&T and a slew of other companies, it is unlikely to pursue any major merger to bolster its content offerings – like AT&T did with its $85.4 billion purchase of Time Warner.
For 2019, Verizon expects profits to grow in the “low single-digit percentage,” an increase over prior estimates.