Verizon Business Revenue Bounces Back As Carrier Bets Big On 5G

The telecom giant saw its strongest second-quarter earnings on record with increases in its hard-hit Business segment. Verizon’s 5G strategy is also starting to pay off in the form of positive customer gains and retention.

Verizon’s focus on all things network is paying off in the form of positive trends in customer acquisition in the SMB space and increased 5G adoption, according to Verizon executives.

“It is remarkable what a difference a year can make. We’re quickly resuming pre-pandemic norms,” CEO Hans Vestberg told investors during the carrier’s fiscal second-quarter 2021 conference call Wednesday. “In the second quarter not only did we generate our strongest earnings on record, but we also produced good growth and profitability in all our units.”

Verizon is heads-down-focused on expanding and amplifying its 5G mmWave network in new and existing markets, as well as densifying its 4G LTE wireless network to manage future traffic demands and the continued deployment of the company’s fiber infrastructure, Vestberg said.

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Verizon earlier this month said that its 5G Business Internet service is now available in parts of 42 U.S. cities as the carrier continues to bet on 5G as a way to boost its Business segment, which has struggled in recent quarters due to the COVID-19 pandemic.

The bet is paying off. Total operating revenue for Verizon Business, which includes the company’s Global Enterprise Solutions, small and midsize businesses, public sector and wholesale businesses, increased 3.7 percent, marking the first quarter of growth since the pandemic, with revenue of $7.76 billion during the quarter compared with $7.48 billion in the year-ago quarter.

A quarter ago, Verizon said it expected SMB revenue to be “subdued” in 2021 as the economy recovers. However, in second-quarter 2021, Verizon saw customers take advantage of advanced communications and security and video collaboration offerings, which created strong momentum in the SMB segment for the first time since the onset of the pandemic, said Matt Ellis, Verizon’s executive vice president and CFO.

Global Enterprise Solutions revenue, which has felt the brunt of the financial fallout from the pandemic, dipped 0.2 percent to $2.58 billion in revenue in second-quarter 2020 compared with $2.59 billion a year ago. SMB revenue, on the other hand, saw double-digit growth after several quarters of decline following the COVID-19 pandemic. The segment grew 11.3 percent during the quarter to $2.89 billion from $2.60 billion in the year-ago period. Public sector grew 6 percent to $1.61 billion during the quarter compared with $1.52 billion last year. Wholesale revenue, however, continued to slide, falling 12.9 percent to $670 million from $769 million in second-quarter 2020.

“The economic reopening, business transformation incentives and 5G for enterprise provide opportunities to drive margin,” Ellis said of the carrier’s Business segment.

Verizon gained 528,000 retail postpaid net additions during second-quarter 2021, including 275,000 phone net additions. Ellis said that the business segment contributed to 178,000 of those retail postpaid net additions, including 78,000 phone net additions.

Verizon said that about 20 percent of its customer base is already on 5G-capable devices.

Verizon in May sold off its struggling Verizon Media business unit, which includes its AOL and Yahoo assets, for $5 billion to private equity firm Apollo Global Management. Via the terms of the deal, Verizon is retaining a 10 percent stake in the media business, which will be called Yahoo, according to the two companies. Vestberg said the deal will help Verizon continue to strengthen its strategic focus on core telecom services.

Basking Ridge, N.J.-based Verizon spent the last two years working through a companywide business and executive team restructuring and its Voluntary Separation program, which included early retirement buyout deals to thousands of its employees, in an effort to achieve $10 billion in cumulative cash savings by the end of 2021. Vestberg Wednesday said the carrier has completed its restructure ahead of its year-end 2021 target.

For the second quarter of the year, which ended June 30, Verizon reported operating revenue of $33.76 billion, up 10.9 percent from $3.45 billion. The carrier’s net income grew 22.9 percent in the quarter to $5.95 billion, up from $4.84 billion during the same period last year. Verizon reported diluted earnings per share of $1.40, up 22.8 percent compared with diluted earnings per share of $1.14 during second-quarter 2020.

The company’s second-quarter 2021 earnings were buoyed by the strengthening U.S. economy, the company said.