Verizon raised its service prices, but warned in its second quarter earnings report that it now expects slower revenue growth and lower earnings during 2022 than it previously forecast.

Mike Dano, Editorial Director, 5G & Mobile Strategies

July 22, 2022

4 Min Read
Verizon lowers financial forecast, even after price hikes

Verizon in recent weeks said it would raise its mobile service prices in a move analysts estimated would give it another $1 billion in earnings this year.

But that apparently won't be enough to halt the company's financial slide: On Friday, Verizon lowered its 2022 wireless service revenue growth expectations to between 8.5% and 9.5%, down from a prior forecast of between 9% and 10%. The company also lowered its earnings expectations.

Exacerbating the situation: Verizon reported postpaid phone net customer additions of 12,000 in the second quarter of 2022. That figure is far below what most financial analysts had expected, and it's dramatically behind the 813,000 net postpaid phone customers AT&T gained during the period.

Figure 1: (Source: Kristoffer Tripplaar / Alamy Stock Photo) (Source: Kristoffer Tripplaar / Alamy Stock Photo)

"We're not satisfied with our performance," Hans Vestberg, Verizon's CEO, said during the operator's earnings call Friday. Vestberg suggested that Verizon's new, lower cost unlimited plan might help the operator gain more customers in the future. However, company officials warned that inflation, competition and other factors will continue to pressure Verizon's performance in the market.

"We expect the market environment to continue to be competitive for the remainder of 2022," admitted Verizon CFO Matt Ellis during the operator's earnings call. He said Verizon expects to see a "small bubble of churn" in the third quarter due to Verizon's recent price increases.

Difficult terrain to continue

According to some financial analysts, there's no relief in sight for Verizon. "The competitive environment will only get more difficult over the course of the next few quarters as Sprint churn goes away, T-Mobile's discount becomes more salient to households, and cable continues to lean into its wireless offers," New Street Research analysts said in a research note Friday following the release of Verizon's Q2 results.

Continued the New Street analysts: "We thought price hikes could offset subscriber pressures, at least in the near term. We thought there was a chance that the company would increase revenue and EBITDA [earnings before interest, taxes, depreciation and amortization] growth guidance for 2022 as a result. In fact, they lowered guidance, suggesting that the pressures are likely to continue."

But what about 5G?

Verizon's sluggish results are particularly noteworthy in light of the operator's ongoing emphasis on 5G.

Verizon last year agreed to spend more than $50 billion to acquire midband C-band spectrum licenses for 5G. And it will spend another $5 billion to $6 billion this year for the equipment necessary to put that spectrum into action.

Today, Verizon covers roughly 135 million people with a speedy 5G network running in its midband C-band spectrum holdings – almost half of the US population. Further, Verizon reported that 47% of its consumer postpaid phone customer base now owns a 5G phone, and that traffic on its 5G C-band network increased 233% in the second quarter of 2022 when compared with the first quarter.

But all that spending doesn't seem to be moving the needle for Verizon in terms of increased profits or more customers.

During Verizon's second quarter earnings conference call, an analyst asked Vestberg whether he still believes Verizon's 5G investments make sense.

In response, Vestberg argued that 5G has helped drive the operator's growing fixed wireless access (FWA) business and that the operator continues to expect services like private wireless and edge computing to pay off. But he acknowledged that 5G smartphones haven't yet performed in the way he expected.

"Short term is a little bit more challenging," he said of Verizon's 5G smartphone opportunity.

"It's the same opportunity that we've talked about all the time," he said of Verizon's overall 5G investment. "Given the economic environment, it might be always some changes to it, but long term I see no difference to it, and that's how we build the network...In general I'm confident that this is a great opportunity for the market."

"I'm confident our strategy is working," he added.

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Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano

About the Author(s)

Mike Dano

Editorial Director, 5G & Mobile Strategies, Light Reading

Mike Dano is Light Reading's Editorial Director, 5G & Mobile Strategies. Mike can be reached at [email protected], @mikeddano or on LinkedIn.

Based in Denver, Mike has covered the wireless industry as a journalist for almost two decades, first at RCR Wireless News and then at FierceWireless and recalls once writing a story about the transition from black and white to color screens on cell phones.

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