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Verizon Business Wireless Anchors Revenues As 5G Promises 'Far Bigger' Opportunities

While business wireless revenues are growing, Verizon will have to bring together wireless and wireline products to position itself as a "partner of choice" for its business customers, CFO Matt Ellis said.

Verizon's strong upward trend within business wireless services, which will only grow bigger with 5G, is helping to offset its weak wireline segment, Verizon CEO Hans Vestberg told investors Friday morning.

The Basking Ridge, N.J.-based carrier posted wireless service revenue in the business segment of $2.9 billion, up 6.1 percent year-over-year. Specifically, Verizon had 2.4 million postpaid device activations within its business segment, reporting 408,000 postpaid wireless net adds with 205,000 of those activations coming from phones, 112,000 tablets, and 91,000 connected devices.

Growth in business wireless reflects the strengths of the carrier’s reliable network and "solutions-based approach" with its business customers, said Matt Ellis, Verizon's executive vice president and CFO.

[Related: 'Verizon 2.0' Restructure Is Paying Off, CEO Says]

Verizon in April kicked off the rollout of its 5G ultra wideband internet. The carrier has since turned on 5G in parts of 15 cities and Verizon said it will make the service available in more than 30 cities by the end of this year. While 4G continues to be an area of focus for Verizon, 5G, Vestberg said, will be the future for many businesses.

"Our conversation with our large enterprises today is all about the latency and the mobile edge compute," he said. "I think [the opportunity] is far bigger than we are standing in front of right now."

Verizon Business includes its Global Enterprise Solutions, small and mid-size business, public sector, and wholesale businesses. The segment stayed relatively flat, with revenues of $7.88 billion during the third-quarter of 2019 from $7.89 billion in the year-ago period, which the carrier attributed to growth in wireless products being offset by ongoing secular pressures from legacy technologies.

Global Enterprise revenues continued to decline, falling by about 2.4 percent to $2.71 billion in revenue, compared to $2.78 billion in the third quarter of 2018. SMB revenue, on the other hand, continued to grow by 6.2 percent to $2.89 billion during Q3 2019, up from $2.73 billion in the year-ago period. Public Sector revenue increased 1.2 percent to $1.47 billion during the quarter, up from last year's result of $1.45 billion. Wholesale revenues continued its downward trend, falling 13.4 percent to $800 million from $927 million in Q3 2018.

The SMB segment continues to be a bright spot on Verizon Business' earnings statement. However, while the carrier expects wireline revenues to decline thanks to legacy services, Verizon still has work to do in the segment, Ellis said.

"The key for us in wireline is to develop products and services that will offset legacy products and services. And by bringing the business segment together, where we're bringing both wireless and wireline products to our business customers holistically, that will put us in a position to really be a partner of choice for our business customers as we move into a 5G world," he said.

Overall, Verizon reported stronger than expected financial results for the second quarter, ended September 30, 2019, anchored by growth in wireless and offset by declines in legacy wireline services. The carrier had operating revenue of $32.84 billion in the quarter, up slightly from $32.61 billion in the third quarter of 2018 and beating Wall Street's estimates of $32.74 billion.

Verizon's net income saw an increase of 5.4 percent in the quarter to $5.34 billion, up from $5.06 billion during the same period last year. The carrier reported adjusted earnings per share of $1.25 cents, up 5.9 percent compared to adjusted earnings per share of $1.19 during third-quarter 2018.

"The network team is continuing to execute well … We are continuing to do a lot of things in fiber and that fiber is so important to the edge intelligence network we are deploying in order to serve our customers better over time," Vestberg said of the carrier's Q3 financial results. "In short, [we] have made a lot of progress in the network."

Verizon last year began a company-wide restructuring when it extended early-retirement buyout deals to thousands of its employees in an effort to achieve $10 billion in cumulative cash savings by 2021. The final group of employees left the carrier in June and so far the company has realized more than $900 million in savings, according to Ellis. The initiative has yielded $4.6 billion worth of cumulative cash savings since the program began, Verizon said.

Verizon earlier this month partnered with Lanner Electronics, a provider of whitebox solutions for networking and security, to launch Verizon's next-generation enhanced Universal Customer Premises Equipment (uCPE) program. The uCPE program will run on Lanner’s hardware platform and integrate with existing Virtual Network Service applications on Verizon's network, the carrier said.

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