Earnings call information says pilot won't be on mobile services, but Verizon still planning to lead the industry in rolling out 5G.

April 21, 2016

4 Min Read
Verizon Will Pilot 5G Fixed Wireless in 2017

Verizon will have a fixed wireless 5G pilot up and running in 2017, CFO Fran Shammo told investment analysts today. That statement came in a first-quarter earnings call that reinforced the network operator's emphasis on building a fiber and wireless infrastructure, primarily to deliver mobile video efficiently. The 5G news seems to put Verizon, which previously was discussing commercial deployment next year, more in line with what others including AT&T are discussing.

Verizon Communications Inc. (NYSE: VZ) is already in 5G tests with multiple vendors, showing the ability to deliver 4K video over mobile networks, and remains "committed to being the first company to roll out 5G," Shammo said. But the trial in 2017 "is not really about mobile, it's all about fixed wireless," he said, seeming to indicate a residential broadband test or something similar.

That all fits into the three-tier strategy he outlined to open the call, which starts at the network connectivity layer and builds upward through global platforms for video and the Internet of Things to incremental revenue opportunities in applications and content.

The results themselves didn't quite meet Wall Street expectations on revenues, but still delivered profits and earnings per share that were on target. Verizon said it earned $4.4 billion, or $1.06 per share, on revenue of $32.2 billion. The latter figure fell just shy of the $32.46 consensus estimate, as reported by Thomson Financial. (See Verizon Earnings Up in Q1 2016.)

Learn more about changing content strategies at the Video Summit, part of our upcoming Big Communications Event in Austin, TX, May 24-25. You can register now.

Shammo admitted the ongoing strike by Verizon workers could affect Q2 earnings, as Verizon has deployed thousands of managers to fill in for striking workers and expects to see installation schedules for new services slip a bit. Also on the labor side, he said Verizon will reduce its call-center workforce through attrition, saying those jobs are high turnover, and fewer people are needed to handle a lower volume of calls from customers who have many more customer service options today.

Among the other notable results:

  • Verizon had 640,000 retail postpaid net adds on the wireless side, including 452,000 new 4G LTE smartphones, and a retail postpaid churn rate of .96%. The smartphone adds are a significant drop from Q4 that is largely attributed to seasonality, Shammo said. Factoring in the loss of 3G and other phones, however, the net phone tally was down 8,000. He told analysts that keeping churn at the current rate isn't likely, however, as a number of two-year tablet subscriptions, based on a free tablet promotion, expire. Most of those aren't being renewed and that strategy was discontinued, he said, but as those contracts end, it will impact the overall churn rate.

  • The 4G LTE network now carries 92% of total data traffic, which increased at a 50% rate last year, Shammo said. Verizon continues its network densification efforts, including the acquisition of XO Communications announced earlier this year and its ongoing small cell buildout, to support higher data speeds and greater penetration, building to 5G.

  • Unsubsidized phone plans are 48% of new customers and that is lowering service revenues. As that number grows to more than half this year, Shammo predicted, service revenues will stabilize and turn positive in 2017. Most customers not opting for the phone subsidy are choosing installment payment plans with that total hitting 5.5 million.

  • Global enterprise revenue was down 3.1% year over year and global wholesale revenue slipped 4% over the same period, as part of a general decrease in revenue on the wireline side of the business. By cutting costs, however, Verizon managed a 1.2% bump in the EBITDA for the wireline segment.

  • While Boston was a "unique" opportunity for a FiOS buildout that Shammo called "a no-brainer," there aren't current plans to add other FiOS cities in Verizon's shrinking local service footprint. He didn't rule out adding cities such as Alexandria, Va., or Baltimore to the mix, however, noting neither of those municipalities have FiOS.

  • AOL had its best quarter in five years, Shammo said, and was up $300 million year-over year.

Shammo had a lot to say about Verizon's video strategy and its focus on mobile video and content for the millennials. My colleague Mari Silbey will be providing coverage on those issues elsewhere on Light Reading.

— Carol Wilson, Editor-at-Large, Light Reading

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