Verizon says it will focus on 5G delivery, end hunt for content
Verizon is bowing out of the battle for content such as TV shows and movies it can distribute across its networks and, instead, is betting on its super-fast 5G network as the telecom giant’s path to success.
The nation’s largest wireless provider updated its 5G plan Tuesday, announcing Houston as the third of four cities where the provider will launch 5G residential broadband service this year. Verizon previously announced Sacramento and Los Angeles in California.
Verizon’s “fixed wireless” broadband solution, which promises speeds of up to 1 Gigabit per second, will be its first 5G service and will land first in those cities. Eventually, Verizon and other providers including AT&T, Sprint and T-Mobile plan super-responsive 5G service for smartphones, tablets and other net-connected devices, but that won’t likely become widespread until 2019.
Until recently, Verizon had been among telecom companies expected to compete for content that could be distributed across its wireless and wired networks. Those competitors include AT&T, which is seeking to acquire Time Warner, and Comcast, already the owner of NBC Universal and until recently a bidder for a collection of Fox assets including its TV and movie studios.
Verizon did acquire AOL in 2015 and Yahoo in a deal that closed last year. But Verizon executives suggested Tuesday the company would focus its efforts on the rollout of its 5G network. The company last month shuttered go90, a video service launched nearly three years ago provided free for Verizon wireless subscribers and stocked with programming that targeted millennial viewers.
“We’re not going to be owning content or ... competing with other content providers, we’re going to be their best partner from a distribution perspective,” CEO Lowell McAdam said during a call with investment analysts about Verizon’s second-quarter financials. “That makes great sense for the company going forward.”
The comments come as Verizon is reportedly in talks with Apple or Google to provide video content for its 5G service. Google’s YouTube TV or Apple TV could be chosen as a provider, Bloomberg reported Monday.
McAdam, 64, who joined Verizon Wireless in 2000 and was named CEO seven years ago, will retire on Aug. 1, with current chief technology officer Hans Vestberg set to become CEO.
Like other major telecom and internet companies, Verizon is looking to new ways to differentiate itself – such as with 5G – as its core business cools.
During the April-June period, Verizon added 531,000 wireless customers including 398,000 smartphones, compared with 614,000 in the April-to-June period a year ago. Verizon now has 116.5 million subscribers, up 1.7 percent from a year ago.
Net income of $4.26 billion declined 5.2 percent compared with the same period last year and fell short of expectations of $4.7 billion, based on analysts polled by S&P Global Market Intelligence.
Adjusted earnings of $1.20, which surpassed expectations of $1.15, took into account $900 million in charges relating in part to the discontinuation of go90, as well as acquisition costs pertaining to Oath, Verizon’s umbrella company for AOL and Yahoo. Revenue rose 5.4 percent to $32.2 billion, surpassing expectations of $31.8 billion.
Revenue from wireless customers increased 5 percent to $22.4 billion during the second quarter. But revenue from its wireline services, including Fios video and broadband service, slipped 3.4 percent to $7.5 billion.
Verizon added a net 43,000 Fios Internet subscribers, an increase of about 4 percent, but lost 37,000 Fios video subscriptions.
Verizon shares rose 1.5 percent. Shares are off nearly 3 percent this year compared with a 5 percent gain for the S&P 500.
Vestberg, 52, who joined Verizon last year after six years as president and CEO of Ericsson, echoed McAdam on the merits of focusing on 5G. “We’re going to have the best network ... and of course, we can attract partners we can work with. That is the model we have and we can continue to develop.”
That message was a positive one, said Craig Moffett, partner and senior analyst at research firm Moffett-Nathanson. “For all the world, it looks like Verizon’s strategy really is to be a bestin-class wireless operator,” he said Tuesday in a note to investors, in which he gave Verizon a Buy and target price of $56.