Verizon misses subscriber estimates
Wireless carrier puts emphasis on Yahoo deal to boost numbers
Verizon Communications posted wireless subscriber gains that missed analysts’ estimates, adding pressure on Chief Executive Officer Lowell McAdam to outline how the $4.8 billion takeover of Yahoo will help the company augment its maturing phone service business.
The company signed up 615,000 total monthly mobile subscribers in the second quarter, mostly tablet users, and trailed the 785,000 estimate average of six analysts surveyed by Bloomberg. New, more lucrative phone customers came to 86,000, short of the 272,000 projected by analysts.
Rather than plunge into a price battle with smaller competitors like T-Mobile US and Sprint, the nation’s largest wireless carrier has focused on buying internet and media companies. McAdam is seeking new revenue from ad sales, an industry where Verizon is a distant No. 3 behind Google and Facebook.
“Advertisers are hungry for alternatives as the market expands,” McAdam said on an earnings call with analysts Tuesday. “Verizon intends to be a significant player in this space.”
The plans to gain more scale in advertising are somewhat tempered by Verizon’s financial situation. While the company paid down $10 billion in loans last quarter, it still has total debt of $99.7 billion, a federal airwave auction to bid in and a dividend to pay.
Chief Finance Officer
“Yahoo, I would say, is a small acquisition for a company of our size but it’s a strategic acquisition for us. It brings viewers, and more viewers bring more advertising scale. ”
— Fran Shammo, chief finance officer, Verizon
Fran Shammo says the road to becoming a significant player won’t be through mega deals, but instead via more smaller acquisitions like Yahoo.
“I would never say that a company of our size is handcuffed,” Shammo said in an interview Tuesday. “But there is nothing on our radar that is large.”
Yahoo will give Verizon millions of online users, including loyal fans of Yahoo Mail, Flickr, Tumblr, Yahoo Finance and Sports, along with some useful digital-ad technology like Flurry and BrightRoll.
“Yahoo, I would say, is a small acquisition for a company of our size but it’s a strategic acquisition for us,” Shammo said. “It brings viewers, and more viewers bring more advertising scale. Facebook and Google are the giants but in a market that will be $180 billion in 2020, it doesn’t take much share to make a big difference.”
Verizon posted secondquarter earnings, excluding some items, of 94 cents a share, according to a statement from the New Yorkbased company. Analysts predicted 92 cents, the average of estimates compiled by Bloomberg. Sales were $30.5 billion, a 5.3 percent drop from last year and below estimates of $30.7 billion.
The shares fell 1.9 percent to $54.81 at close of trading Tuesday. The stock had climbed 21 percent this year through Monday’s close.
On the wireline side, Verizon lost 41,000 FiOS TV and 13,000 FiOS internet subscribers in the second quarter, in large part because of a seven-week strike by 39,000 union workers pressing for higher pay, more job security and benefits.
Requests including new service installations were delayed. The stoppage cut earnings by about 7 cents per share in the quarter, the company said. At the same time, sales for FiOS services increased 3.7 percent, to $2.8 billion, from a year earlier.
The carrier added 356,000 tablet customers in the quarter, compared with analysts’ projections for 503,000.
Retail postpaid churn was 0.94 percent in secondquarter 2016, an increase of 0.04 percentage point from last year.