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Verizon Churns Wireless Subscribers And Addresses Merger Comments While Revenues Dip From Competitive Pressures

Verizon lost hundreds of thousands of wireless customers in just three months, but the company's recent remarks about possible merger discussions with Comcast, Disney or CBS pulled focus during the Q1 2017 earnings call. The carrier's revenues fell during the quarter because of acquisition costs and competitive pressure.

Verizon executives answered questions on Thursday regarding a possible tie-up between the carrier and cable giant Comcast, CBS, or Disney, telling investors that Verizon is focusing on "organic growth for now."

Verizon's Lowell McAdam made headlines on Tuesday when the carrier's CEO expressed interest in possibly merging his company with another large corporation to accelerate 5G expansion and media delivery.

’If [Brian Roberts, CEO of Comcast] came knocking on the door, I’d have a discussion with him about it,’ McAdam said during an interview with Bloomberg. ’But I’d also tell you there isn’t much that I wouldn’t have a discussion around if somebody came and said ’here’s a compelling reason why we ought to put the businesses together.’’

[Related: CRN Exclusive: Verizon's Schijns On XO Integration, Partner Program Revamp And How Not Selling Connectivity Hurts Cloud Ambitions ]

During the Basking Ridge, N.J.-based carrier's Q1 2017 earnings call, Verizon specified that while it is confident in its organic strategy, it is "always looking" to accelerate inorganically with the right opportunity, said Matt Ellis, Verizon's executive vice president and CFO.

"If somebody called, would we take the call and have a conversation with them? Of course we would, but we are also very confident with the assets we have," Ellis said.

Ellis added that Verizon is focused on bolstering its network and deepening its fiber assets, as evidenced by its purchase of XO Communications.

Verizon's net income fell nearly 20 percent in the first quarter to $3.45 billion, or 84 cents per diluted share, from $4.31 billion, or $1.06 per share, a year earlier.

Verizon's wireline division, which includes Enterprise Solutions, Partner Solutions, and Business Markets, experienced a modest decline of less than 1 percent, with revenues of $7.88 billion in Q1 2017 compared to $7.92 billion in Q1 2016. However, the migration from legacy voice services to advanced communications products is generating a "revenue headwind" for the long term, Ellis said.

Internet of Things (IoT) revenues provided a bright spot within Verizon's financials during Q1, jumping up 17 percent during the quarter.

Verizon's recent restructuring of its business units, which includes the new Verizon Business Markets division that will increase the carrier's focus on SMBs, state and local governments, and educational organizations, did not impact Q1 2017 earnings, said Mike Stefanski, senior vice president of investor relations for Verizon.


For the fourth quarter in a row, total operating revenues fell, dropping 7.3 percent in Q1 2017 to $29.81 billion from $32.17 billion in the same quarter a year ago. Verizon's operating revenue fell shy of Wall Street expectations of $30.49 billion for Q1 2017, which ended on March 31.

Stefanski said that these "seasonably soft" quarterly earnings were due to its recent acquisitions, including the close of its XO Communications deal in February for $1.8 billion.

Despite the carrier resurrecting its unlimited data plans in February following an overhaul of its data plans in 2016, net income within the wireless division slipped 5 percent to $20.9 billion from $22 billion in the year-ago period. Verizon attributed this decline to decreased revenue from data overages, as well as equipment promotions and customer migration to the new plans.

Verizon also said it lost 307,000 retail postpaid subscribers on a net basis in the first quarter, indicating that the carrier is struggling to compete with the likes of rival carriers T-Mobile and Sprint.

Ellis said that the carrier is confident that wireless revenues will even out during the second half of 2017 because account access fees will replace overage fees over time. Verizon's superior network will also allow the carrier to handle high network usage by unlimited customers, he added.

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