Verizon reported disappointing quarterly results and said it lost subscribers who pay a monthly bill despite its re-launch of unlimited data plans.
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. A year ago during the same period, it added 640,000 subscribers.
Total operating revenue fell to $29.81 billion for the fourth straight quarter from $32.17 billion a year earlier. Growth in the wireless subscribers has slowed down now that most Americans have a cellphone. Turns out, it took bringing back truly unlimited data from the dead to step a gush of subscribers from the network.
Before the launch of its "Verizon Unlimited" plans in mid-February, Verizon had a retail postpaid phone net loss of 398,000; after the launch, Verizon said it added 109,000 retail postpaid phone connections. The nation's largest carrier had revenue from January through March of $20.9 billion, which was 5.1% lower than what Big Red grossed a year earlier.
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. Verizon gained 209,000 post-paid phone customers in the period and AT&T lost 1.2 million. Verizon gained 209,000, but that was smaller than 1.1 million gained in 2015.
Verizon's losses underscore the urgency with which the company must make that evolution as it seeks to diversify beyond its traditional role as a provider of connectivity, said Jeff Kagan, an independent telecom analyst. In premarket trading on Thursday, the company's shares sunk over 2%, while the stocks have dropped by over 8% from the starting of this year. AT&T's unlimited plan costs about the same as Verizon's; a cheaper unlimited option has fewer features.
". if there is the right opportunity out there to accelerate [Verizon's] strategy organically in a way that adds shareholder value, we're always looking at those opportunities", Verizon Chief Financial Officer Matthew Ellis explained McAdam's comments in a conference call Thursday. These results failed to meet the expectations of Wall Street.
Capital expenditures totaled $3.1 billion in first-quarter 2017, as Verizon maintained its network leadership.
According to Thomson Reuters I/B/E/S, analysts had expected adjusted earnings per share of 99 cents and revenue of $30.77 billion.
Verizon added 35,000 FiOS internet connections but lost a net 13,000 FiOS Video connections during the quarter.
Verizon expects improvement in wireless service revenue this year, with total revenue "fairly consistent" with 2016. Verizon's 2017 effective tax rate should fall within a range of 34 to 36 percent, the company said, which would exclude any impacts from the Trump administration's potential tax reform.