Verizon emphasizes customers’ willingness to pay for its unlimited offer
Verizon added 614,000 retail postpaid customers during the second quarter and said that customers are willing to pay a premium for an unlimited plan on its network.
“Even with the price premium we have, it shows that customers value the high-quality network experience that we deliver, and we saw that throughout the quarter,” said Matt Ellis, EVP and CFO for Verizon, on the quarterly results call with investors. “We saw great results from customers, once they had that comparable offer.”
Investors sent the company’s stock up more than 6% in morning trading as the company met earnings expectations and had better than expected revenues.
Verizon reported 590,000 postpaid smartphone net additions, with retail postpaid churn at 0.7%. However, wireless service revenues were down 6.7% year-over-year. Verizon reported that 75% of its postpaid phone base is now on unsubsidized device pricing and that 77% of its new device activations during the quarter were on payment plans.
In terms of Verizon’s wireline operations, the XO Communications acquisition helped boost segment revenue: wireline revenues were up 1.2% year-over-year to $7.8 billion. If XO was excluded, Verizon said, wireline revenues dropped 2.8%. Fios revenues were a bright spot, with revenue up 4.4% year-over-year even though Fios lost 15,000 video subscribers during the quarter. That was more than offset by 49,000 Fios internet customer additions.
Total revenues for the company were $30.5 billion, basically flat from the same period last year — however, when divestitures and acquisitions were excluded, total revenues were down 2% year-over-year. Consolidated capital expenditures for the first half of 2017 were $7 billion, down slightly from $7.3 billion in the first half of 2016. One area with significant growth was in Verizon’s telematics and IoT business, with second quarter revenues up about 20% year-over-year to $220 million.
Ellis noted that despite the addition of unlimited plans, Verizon continues to do well in RootMetrics’ independent testing of wireless networks, dominating results announced this week. T-Mobile US has sniped at both Verizon and AT&T over their unlimited offers once they followed it into the unlimited market, with T-Mobile US claiming that its network is better suited to handle the additional traffic generated when customers take advantage of unlimited plans.
As far as the future of Verizon’s network, Ellis emphasized three areas: continuing to evolve to more advanced LTE features; densification; and padding spectrum holdings. However, he noted that densification “has proved to be a very efficient way of adding capacity in places we need to, and from a cost efficiency standpoint as well” compared to buying more spectrum — although Verizon does continue to make purchases on the secondary market “when spectrum is priced at the right level,” he said.
Verizon also is “off and running on millimeter wave,” Ellis said, noting that Verizon has its first batch of customers on its trial network. “We will have trial results toward the end of the year that will give us valuable insights for commercial deployment.”
