Verizon Network Not Buckling Under The Weight Of COVID-19, Says CEO Hans Vestberg
The Verizon chief also says he sees ‘a great opportunity’ and room for investment in the Verizon Business group that have been accentuated by COVID-19.
The COVID-19 coronavirus pandemic caused sharp declines in wireless equipment sales, but the Verizon network is keeping up with the staggering surge in network demand, which included a 982 percent increase in collaboration traffic and 800 million calls per day at the peak -- more than twice the amount of calls Verizon sees on its busiest day of the year, Mother's Day.
"We're seeing starkly different trends in the last few weeks. This call is very different than all previous earnings call I have ever done … because this is a healthcare crisis that impacts each and everyone all over the world," Verizon CEO Hans Vestberg told investors during the carrier's fiscal Q1 2020 conference call on Friday.
Vestberg said that while the company is actively working through the crisis to support its front-line workers, the carrier at the same time is focused on daily and future business -- "the new normal."
"We've built a robust network that can deliver high-quality … and it is keeping up very well despite the changes and enormous usage," he said. "Our [network] assets are extremely important in the delivery of the new normal in all our customer groups."
Vestberg said that 5G and fiber will continue to be one of Verizon's biggest areas of investment in 2020, and that Verizon is finding new and innovative ways to build out its 5G network and receive approvals from municipalities, while keeping with social distancing and safety measures as a result of COVID-19.
[Related: 'Verizon 2.0' Restructure Is Paying Off, CEO Says]
Verizon Business in April announced plans to buy Blue Jeans Networks for its enterprise-focused video and event platform. Vestberg said that Verizon sees "a great opportunity" and room for investment in the Verizon Business group that have been accentuated by the pandemic.
Verizon Business, which includes the company’s Global Enterprise Solutions, small and mid-size business, public sector, and wholesale businesses. The segment stayed relatively flat, with revenues climbing .5 percent to $7.68 billion during the first-quarter of 2020 compared to $7.72 billion in the year-ago period. The carrier attributed the results to declining legacy technologies.
Global Enterprise revenues continued to decline, dipping 2.2 percent to $2.63 billion in revenue in Q1 2020, compared to $2.69 billion in the first quarter of 2019. SMB revenue, on the other hand, continued its upward growth trend, despite COVID-19, climbing 3.5 percent to $2.80 billion during Q1 2020, up from $2.71 billion in the year-ago period. Public Sector stayed relatively flat, growing a modest .2 percent to $1.47 billion during the quarter. Wholesale revenues continued to slide downward, falling 9.1 percent to $772 million in the first quarter of 2020 from $849 million in Q1 2019.
The SMB segment saw strong business wireless trends for smaller companies last year, which trickled into early 2020, but Verizon expects small businesses to be financially impacted by the coronavirus as many were forced to close its doors in March and April.
"At this point, it's unclear how long this will continue," said Matt Ellis, Verizon's executive vice president and CFO. "We're working to keep our relationships with our customers."
Other the other hand, Verizon is seeing increased demand from Large enterprises and public sectors who need strong broadband to run critical services, Ellis said.
"Enterprise, public sector and wholesale customers will be less impacted by [the pandemic] than small businesses," he said.
Verizon Media was the segment that was the hardest bit by COVID-19. Total Verizon Media revenues were $1.7 billion, down 4 percent year-over-year, which the carrier said were almost entirely driven by the impact of coronavirus. Verizon Media, its business unit that used be called Oath and contains its AOL and Yahoo purchases, saw increased levels of customer engagement on its platforms thanks to a new Coronavirus Hub that Verizon created to keep customers informed, but advertising rates have declined in the current environment, Verizon said.
Like its Dallas-based competitor AT&T, Verizon is also doing its part to keep consumers and SMBs connected, regardless of missed payments, until May 13. The carrier has also waived late fees for those financially impacted by the pandemic and extended 15 gigs of data to each of its consumer and small business wireless customers who aren't on unlimited data plans in March and April.
Basking Ridge, N.J.-based Verizon withdrew its financial guidance related to consolidated revenues for 2020 as a result of the economic uncertainty caused by the pandemic.
For the first quarter of the year, which ended March 31, Verizon reported operating revenues of $31.61 billion in the quarter, down 1.6 percent from $32.13 billion in Q1 2019. Verizon attributed the decline to wireless growth being offset by a sharp reduction in equipment revenue due to retail stores closing during the coronavirus outbreak. The carrier's net income fell 16.9 percent in the quarter to $4.29 billion, down from $5.16 billion during the same period last year. Verizon reported adjusted earnings per share of $1.26 cents, up 5 percent decline compared to adjusted earnings per share of $1.20 cents during first-quarter 2019.
Verizon spent 2019 working through company-wide business and executive team restructure 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 2021.