5G and Beyond

Verizon Looks Ahead to 5G as 4G Competition Affects Q4

Verizon is expecting to invest up to $17.5 billion on capital expenditure in the coming year on bolstering its nationwide 4G network with small cells -- and more -- while preparing for future fixed 5G services.

New Verizon Communications Inc. (NYSE: VZ) CFO Matt Ellis said on the No. 1 US mobile operator's fourth quarter call Tuesday morning that capital expenditure (capex) for 2017 would be consistent with 2016. Ellis said that the spending range for capex in 2017 will be between $16.8 billion and $17.5 billion. (See Bye Fran! Verizon CFO Is Retiring.)

Verizon spent $17.1 billion in total on capex in 2016, $11.2 billion of that on its wireless network. This was slightly lower than the predicted range of $17.2 billion to $17.7 billion for 2016. Mobile capex in the fourth quarter was $3.5 billion, compared to $2.8 billion in the previous quarter.

The expenditure will continue Verizon's transition "from coverage to densification" on its 4G LTE network, Ellis said. This means adding more Cloud-RAN (C-RAN) infrastructure, small cells, distributed antennas (DAS) and fiber to increase speed and capacity on the network using existing spectrum. (See Verizon: Cloudy With a Chance of Radios!)

"Fiber is an important area," Ellis noted.

In part, this is because Verizon wants to be the first operator to deliver fixed 5G wireless services to homes in the US, as soon as 2018. Ellis said that Verizon has completed technical and lab trials in 2016, and is now ready to get into the field. (See Nokia CTO: 2017 Is the Year 5G Gets in the Field.)

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Ellis says that "about 10" field trials are anticipated so far, with "commercial-scale pilots that are getting underway in various locations around the country right now."

These will test fixed 5G wireless performance in urban and suburban areas. This will include metrics like how many nodes are needed for a deployment and how many homes can be passed with a 5G node. This should help Verizon understand how much it will cost to actually deploy 5G, which it hopes to eventually make nationwide.

"It's not just in the ILEC footprint. We certainly see the opportunity to launch 5G across the country... within and without the ILEC footprint," Ellis said.

The focus on 5G and "densification" to provide a "premium service" and grab a next-gen network lead is understandable. Since Verizon's fourth quarter results indicate that the number one player is feeling the increased competition in US mobile market from T-Mobile US Inc. and Sprint Corp. (NYSE: S).

T-Mobile's CEO John Legere made no secret that the operator's summer launch of $40-a-line unlimited family plans were aggressively aimed at Verizon. (See T-Mobile's Unlimited Plans Aim at the Big Two.)

Verizon added 591,000 "postpaid" subscribers -- people who pay a monthly bill for service, rather than pay-as-you-go -- in the latest reported quarter. Analysts had been expecting 726,000 postpaid ads in the fourth quarter.

Verizon posted operating revenue of $32.34 billion, compared to $34.25 billion in the same quarter last year. Analysts had been expecting revenue of $32.08 billion, according to Thomson Reuters . This is the third straight consecutive quarter where Verizon's operating revenue dropped.

The service provider reported that net income fell to $4.5 billion -- or $1.10 per share -- in the quarter, down from $5.39 billion -- or $1.32 per share -- a year earlier.

Verizon's shares are down $2.31 -- or 4.41% -- at $50.10 on the results.

— Dan Jones, Mobile Editor, Light Reading

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