Verizon Doubles Down On Media, IoT Segments As Business Services Revenue Decline

Verizon is relying on its next-generation networking technologies, the Internet of Things, and its Oath media business to propel its growth and keep competition at bay in the crowded telecommunications market.

The carrier is focused on adding content to its Oath platform and taking advantage of its recently-acquired wireless spectrum assets to build the "best network of the future," said Matt Ellis, Verizon executive vice president and CFO, during Verizon's earnings call Tuesday for the first quarter ended March 31. At the same time, Verizon is full-steam ahead on its initial 5G launch, which is scheduled for later this year, Ellis said.

Verizon Connect, a new organization that includes telematics and IoT, posted first-quarter revenue of $234 million. The carrier said that IoT revenue, including Verizon Connect, climbed 13 percent compared to Q1 2017. Verizon's Oath business unit, the combination of its AOL and Yahoo assets, generated revenue of about $1.9 billion in the first quarter.

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The Basking Ridge, N.J.-based carrier reiterated for the second consecutive earnings call that it isn't eyeing any blockbuster acquisitions at the moment, Ellis added.

Wireless operating revenue rose 4.9 percent to $21.90 billion during the fourth quarter, compared with $20.88 billion in first-quarter 2017. Verizon attributed its largely positive growth during Q1 2018 to its "solid" performance in the wireless space.

Total operating revenue for Verizon's Wireline Division, however, which includes its Enterprise Solutions, Partner Solutions, Business Markets segment and consumer markets, slipped 1.6 percent to $7.56 billion during first-quarter 2018 from $7.68 billion in the year-ago period.

Overall, Verizon's business services division took a small hit during Q1 2018. Excluding Verizon's recently-acquired XO Communications business unit, Enterprise Solutions declined about 3 percent during the quarter, dropping to $2.24 billion in revenue during the quarter, compared with $2.31 billion in first quarter of 2017. Partner Solutions revenue saw a modest 0.1 percent decline to $1.22 billion in the first quarter of 2018, down from $1.23 billion in the year-ago period. Revenue for Verizon Business markets also slipped by 0.9 percent, down to $871 million from $879 million one year ago.

Ellis attributed the drop off in wireline revenues to a decline in legacy telecom services and pricing pressures in the market that offset growth in fiber-based services. "We see fiber demand as the main driver for future growth opportunities within this segment," he said.

He added that so far, tax reform hasn't had an impact on the telecom and IT buying patterns of business customers.

"We haven't seen a significant change in the level of demand from our enterprise customers," Ellis said. "We'll see if that picks up as the year goes on."

Verizon reported operating revenue of $31.77 billion in the quarter, up about 6.6 percent from $29.81 billion in the first quarter of 2017. That topped analyst expectations of $31.25 billion in revenue, according to Thomson Reuters estimates.

Verizon's net income for the quarter was $4.66 billion, up about 31 percent from $3.55 billion during the same period last year. The carrier reported adjusted earnings per share of $1.11 cents compared with diluted earnings per share of 84 cents during first-quarter 2017.

The carrier reported a net increase of 260,000 retail postpaid connections during Q1 2018. Verizon saw a net phone loss of 24,000 and 75,000 tablet subscribers, although it added 359,000 new wearables and other connected devices.