Verizon Exceeds Q4 Expectations

Verizon Wireless at La Salle Chicago
1.5 million net retail postpaid connections added in the quarter; 112.1 million total retail connections. (By Ashesha Mehrotra/MEDILL)

 By Ashesha Mehrotra

Verizon Communications Inc. reported higher-than-expected fourth quarter earnings Thursday, bolstered by an addition of 1.5 million wireless retail postpaid users and hefty tax benefits.

The company swung to a profit of $5.51 billion, or $1.32 per diluted common share, from a loss of $2.14 billion, or 54 cents per share, the year-ago quarter.

Shares of the nation’s leading wireless phone service provider rose to $46, up $1.59, or 3.57 percent. .

The company, known for its high-quality network, also reported an adjusted non-GAAP earnings per share of 89 cents, exceeding the Wall Street expectation of 88 cents.

In the non-GAAP computation Verizon excluded favorable accounting adjustments made to its pension obligations and the gain from a sale of a spectrum license, amounting to 44 cents per share in all.

“We are entering 2016 with a lot of confidence. Verizon’s strong growth in earnings, and growth in high-quality connections and profitability in wireless resulted in free cash flow,” said Fran Shammo, chief financial officer.

Capital investment in wireless totaled $3.3 billion in the fourth quarter and $11.7 billion, up 11.5 percent, for the full year. Verizon stated it plans to pilot into 5G technology in 2016.

“The carrier is taking a thoughtful approach towards architecting its business towards what it believes will be a ‘dual play world’ – wireless and broadband,” said Amir Rozwadowski, an analyst at Barclays PLC, in a report. “The key on the former is to ensure long-term network capacity through its support for LTE migration, new technology adoption and leading the charge on 5G while simultaneously creating platforms that expand its TAM,” or total addressable market.

Verizon recently announced a new tiered pricing model, which changes old plans that permitted unlimited data usage. Now, the average revenue per user is expected to rise as users move up to higher-priced tiers, the company stated.

“Wireless data opportunities are expanding. About 70% of Verizon Wireless postpaid subscribers are using smartphones; therefore, the company still has an incremental penetration opportunity for wireless data services,” wrote David Heger, and analyst at Edward Jones, in his report.

Acquisitions of AOL and Millennial Media significantly impacted Verizon’s outlook for a cross-platform consumer and advertising offerings, mainly in video and mobile. In 2015 the company also launched the its mobile-first social entertainment platform, Custom TV options for its Fios customers, and Thingspace suite to make further progress in the Internet of Things.

“Verizon embraced transformational change in 2015, and in 2016 the company has a huge opportunity to drive a new era of growth in our industry,” said Chairman and CEO Lowell McAdam in the press release.

For the full year the company’s net income was $18.37 billion, or  $4.32 per share, a 53.7 percent increase from the year-earlier income of $11.95 billion, or $2.42 per share. Revenues rose to $131.62 billion from $127.09 billion.

Photo at top: Verizon added 1.5 million net retail postpaid connections in the December quarter; it has 112.1 million total retail connections. (Ashesha Mehrotra/MEDILL)