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By Sarah Krouse
Verizon Communications Inc.'s core wireless business lost lucrative phone customers in the first quarter, as it offered fewer promotions and focused on upgrading to a faster 5G network.
The carrier said it lost a net 44,000 postpaid phone connections during the period, but continued to upgrade existing customers to pricier tiers of its unlimited data plans. Those postpaid phone losses were worse than some analysts expected and more severe than the same time last year, when it lost 24,000 postpaid phone connections. Verizon added a net 653,000 new postpaid phone connections during the fourth quarter of 2018.
Wells Fargo analysts said last week that they expected Verizon to lose 15,000 postpaid phone connections during the period because it had been less generous with promotions than some of its rivals.
Verizon executives said on an analyst call that there was a fair amount of competitive activity in the first three months of the year, and that the period is typically a weaker one than other quarters for new connections. The carrier continued to increase the number of connections per account and expected to sell more so-called unlimited wireless plans, which currently comprise less than half of the carrier's total connections, they added.
The largest U.S. carrier by subscribers highlighted ongoing efforts to build out its 5G network and earlier this month began offering 5G service in Chicago and Minneapolis, but received mixed reviews from analysts who said the service's reach was limited. It plans to roll out the service in parts of more than 30 cities before the end of the year.
"We're best positioned to capitalize on all the opportunities that 5G will bring to bear," Chief Executive Hans Vestberg told analysts Tuesday.
In all, net income attributable to Verizon was $5 billion, up about 11% from $4.5 billion a year earlier. Quarterly revenue ticked up about 1% to $32.1 billion.
Verizon shares fell 3.4% in early trading.
The company is in the process of cutting $10 billion in costs by 2021 and said that it had trimmed $3 billion of that total so far, helped by a voluntary severance program and expense savings.
Wireless carriers globally are racing to upgrade their networks, hoping that the service's faster speeds, lower latency and ability to connect more devices will bring in fresh revenue and spur new applications across smart cities, health care and manufacturing.
Meanwhile, wireless companies in a crowded U.S. market are trying to sell additional connected devices and steal subscribers from each other.
Verizon had 117.9 million wireless connections at the end of March, down from 118 million at the end of 2018. It is the first major U.S. carrier to report quarterly earnings; rivals including AT&T Inc. will share their performance later this week.
Verizon said it added 261,000 connections for smartwatches and other connected devices, but lost 156,000 tablet connections.
Revenue within Verizon's media unit was $1.8 billion during the quarter, down 7.2% from a year ago. It said the business continued to suffer from declines in desktop advertising revenue, even as its mobile advertising revenue grew.
Verizon's landline business added 52,000 net new home broadband connections during the first quarter of 2019 and lost a net 53,000 Fios video customers. Fios has lost pay-television customers over the last two years as a result of cord-cutting and the growth of streaming services like Netflix Inc.
The company also announced a new partnership with Alphabet Inc.'s YouTube TV to offer the service free to Verizon's mobile, Fios internet and 5G home customers.
Matt Ellis, Verizon's chief financial officer, said in an interview that its pay-TV service remained important.
"For the customers that want the more traditional bundle, we have it, it's called Fios TV. For customers that want OTT, we have it," Mr. Ellis said.
Verizon has opted not to make large new investments in media content and instead partner with other companies.
Executives told analysts they don't anticipate pursuing a large-scale acquisition and are instead focused on investing in the business, maintaining the company's dividend and completing small deals.
Write to Sarah Krouse at email@example.com
(END) Dow Jones Newswires
April 23, 2019 10:59 ET (14:59 GMT)
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