Verizon Business One Of Carrier's 'Greatest Opportunities' For Growth In 2020, Says CEO

Verizon CEO Hans Vestburg said the carrier in investing in processes, tools and structure for its Verizon Business segment, which posted weak earnings for 2019.

Verizon spent 2019 working through brand changes, process changes with its Voluntary Separation program for employees, and creating new management teams to access the market differently. These changes, said Verizon CEO Hans Vestberg, are starting to pay off.

Despite the Basking Ridge, N.J.-based carrier's new approach to the telecom market, more work needs to be done to improve the Verizon Business segment, which saw declining revenues in 2019, Vestberg told investors Thursday morning.

"We are investing in processes, tools, and structure in this area," he said. "This is so important because this is one of the greatest opportunities of growth for us when it comes to 5G."

[Related: 'Verizon 2.0' Restructure Is Paying Off, CEO Says]

Verizon began a company-wide restructuring in 2018 when it extended early-retirement buyout deals to thousands of its employees in what it called its Voluntary Separation program, an effort to achieve $10 billion in cumulative cash savings by 2021. The initiative yielded $1.3 billion worth of cumulative cash savings in 2019, said Matt Ellis, Verizon's executive vice president and CFO.

These company-wide changes are helping Verizon return to its core telecom services as the company focuses on 5G and fiber opportunities in 2020, especially in the business segment, Vestberg said.

Verizon Business includes the company’s Global Enterprise Solutions, small and mid-size business, public sector, and wholesale businesses. The segment stayed relatively flat, with revenues of $8.07 billion during the fourth-quarter of 2019 compared to $8.01 billion in the year-ago period. The carrier attributed the flat results to growth in wireless products being offset by ongoing price pressures and declining legacy technologies.

Ellis said that Verizon expects business wireline revenues to increase slightly in 2020, but not by dramatic numbers.

Global Enterprise revenues continued to decline, dipping 1.6 percent to $2.74 billion in revenue, compared to $2.79 billion in the fourth quarter of 2018. SMB revenue, on the other hand, continued its upward growth trend by climbing 7.9 percent to $3.07 billion during Q4 2019 (ended Dec. 31), up from $2.85 billion in the year-ago period. Public Sector revenue declined 1.6 percent to $1.49 billion during the quarter, down slightly from last year's result of $1.51 billion. Wholesale revenues also continued to slide downward, falling 10.6 percent to $772 million from $864 million in Q4 2018.

The SMB segment continued to be a bright spot of Verizon Business' earnings in 2019 with strong business wireless trends for smaller companies, Ellis said.

Vestberg said the changes Verizon has made in 2019 has helped the carrier reach more large enterprise customers. "I met so many large corporations in 2019 that we now can actually work with because our offering is so strong when it comes to fiber and 5G. But we need to put that structure in place for the Verizon Business group in order for them to execute on revenue and cost side."

Verizon in 2019 rolled out its 5G ultra wideband internet. The carrier has since turned on 5G in parts of 31 cities, beating its goal of hitting 30 cities with 5G by the end of 2019, Vestberg said. Verizon also launched what it called the country's first 5G mobile edge compute offering, 5G Edge in Chicago in December, which uses Amazon Web Service's AWS Wavelength service.

While 5G will be one of Verizon's biggest areas of focus in 2020 as more 5G devices become available for users, Vestberg said the carrier will be continuing to lay the groundwork this year for 5G and that 2021 will be the year that 5G begins to positively impact financials.

Verizon reported mixed results for the final quarter of the year, which ended December 31, 2019. The carrier had operating revenue of $34.78 billion in the quarter, up slightly from $34.28 billion in the fourth quarter of 2018.

Verizon's net income increased in the quarter to $5.22 billion, up from $2.07 billion during the same period last year. The carrier reported adjusted earnings per share of $1.23 cents, a bump up compared to adjusted earnings per share of 47 cents during fourth-quarter 2018.