Verizon added 429,000 postpaid phone net subscribers in the third quarter, topping analyst consensus estimates and ending the quarter with 122 million total retail connections.
Wireless service revenue was $17.1 billion, a 3.9% increase year over year. Retail postpaid phone churn was 0.74%. The company ended the third quarter 2021 with free cash flow of $17.3 billion.
Verizon also said more than 25% of its consumer wireless phone customers now have 5G-capable devices.
During the earnings call with analysts, Verizon CEO Hans Vestberg said the company’s strategy around becoming a national broadband provider includes providing Fios, as well as fixed wireless access (FWA) with LTE, 5G, millimeter wave and C-band.
Much of the company’s long-term growth is in FWA and mobile edge compute (MEC) and while he acknowledged there are supply chain issues related to the C-band deployment, he didn’t dwell on them.
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Asked about the current mobile competitive landscape, which includes increased competition from cable companies and the emergence of Dish Network, Vestberg acknowledged there is “a little bit more competitive landscape right now,” adding that broadband and mobility are two of the most important infrastructures right now.
5G is scaling and the economy is strong, so “of course, that’s a moment where we see a lot of competition,” but looking at Verizon’s numbers, “we are competing extremely effectively,” gaining high quality customers regardless of the type of competition, he said.
Last week, Verizon dropped its $1,000 Apple iPhone offer for new and existing customers and this week, it’s anticipating the addition of new Google Pixel handsets to the mix.
“We have been going back and forth on our promos,” he said. Consumer Group CEO Ronan Dunne and his team on the consumer side of the business consider long-term profitability and the quality of customers when they do promotions and “right now, we feel very good on how we compete in the market,” so there will be promos when the timing is right. “We feel really good about it.”
Verizon is on track to meet its FWA household coverage targets with an expected 15 million homes reached with 4G and 5G by the end of this year. To date, 5G Home is in 57 markets, and 4G LTE Home is in more than 200 markets across the U.S.
Vestberg said the FWA ARPU is similar to that of the mobility segment. When it comes to subscribers, it’s a mix of mmWave, 4G and customers are using more data on FWA on 5G than on Fios.
With the C-band deployment, “we’re on track for that” to cover a population of 100 million after one year and while “there are some challenges” in the supply chain, the team is doing “enormous work,” Vestberg said.
The long-term planning that they did with vendors is paying off, in that orders were placed over two years ahead of deployment. Verizon will be able to amplify its messaging around 5G with the C-band spectrum, on which Verizon spent more than $45 billion. Capital expenditures related to C-band are more than $1 billion so far this year.
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Verizon’s position in consumer wireless is built around having the best network. Asked about Verizon’s response to the third-party reports, including from Opensignal, showing T-Mobile’s network for 5G is faster and broader, Vestberg said Verizon relies on RootMetrics because that’s “the most sophisticated and scientific way of measuring” the network, and “we’re undoubtedly the leader there.”
Without commenting directly about its competition, he said “clearly one has always lost.”
With the expected acquisition of TracFone, which would bring Verizon into the prepaid space like never before, he said they will continue the back-end support with the various brands. “We want to keep the points of sale. We want to keep the offerings and we want to serve the value market,” he said, adding that he can’t go into further details due to the pending nature of the transaction.
Third quarter's analysis
Analysts at New Street Research said Verizon reported a solid set of results, beating on wireless and Fios net adds while delivering better-than-expected margins. “While we think weakness in ARPU may reflect underlying competition, there is little to quibble with, especially given Verizon has pulled back on its promotions,” wrote New Street’s Jonathan Chaplin.
“We suspect 3Q21 will see record net adds for the group given strong support from federal subsidies through September, plus rising uptake from EBB. As such, Verizon’s strong adds are not a huge surprise, and we would expect a similar theme from the rest of the group,” he added.
While Verizon is far from conceding network superiority, “the physics are the physics,” noted analyst Craig Moffett in a report for investors today.
Verizon spent years as the best network, but it’s harder to maintain that claim in the 5G era. “T-Mobile has an advantage in both spectrum propagation (coverage) and spectrum depth (speed). And Verizon still charges a premium. Retention and growth will be harder in a world where their network superiority has been ceded to a lower priced service,” Moffett said.
Verizon now has to compete not only with T-Mobile’s better network and lower prices, “but also cable’s identical network (it is, after all, Verizon’s network) and lower prices.”