Verizon not yet seeing material impact from coronavirus

Verizon sign
Verizon is monitoring the situation to see if there's a change in consumer behavior due to spread of the virus. (FierceWireless)

While the coronavirus is taking a toll on the world, it's not yet having a significant economic and financial impact on Verizon, but that’s not to say it won’t happen.

That was the message from SVP and CFO Matt Ellis during a Morgan Stanley investor event on Tuesday where he was asked about the COVID-19 and its impact on the company.

“Right now, not significant, not material. Not to say there’s been no impact but not material at this point,” he said. That’s linked to the business being based off a recurring monthly service revenue model rather than the initial upfront transaction. “We haven’t seen a material impact yet.”

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On the handset side, there’s a risk—not so much in the first quarter of the year since there were handsets in the pipeline as the virus started to spread, “but if we see continued disruption” as some handset OEMs have stated, and it lasts for a significant time period, “I think we’ll see a more material impact on our equipment revenue line.”

It doesn’t significantly affect the company's earnings profile given that’s not where most of the earnings come from; the earnings come mainly from service revenue. “But certainly there may be some in the future months, some impact on the equipment so we’ll have to wait and see,” he said.

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What they don’t have enough data on yet is whether there’s a change in consumer behavior. “We haven’t got the data yet to know, but we’ll stay close to that,” he said.

This time of year traditionally is one of the quieter times, so if people are staying away from retail stores, it will take time to show up in the data. Verizon is also monitoring the situation to see if there’s any change in the behavior of its business customers.

On the network side, the company isn’t seeing anything material to impact that side of the business, but “this is obviously a fluid situation and we’ll have to wait and see how it continues to evolve,” he added.

RELATED: Marek’s Take: Coronavirus’ impact will be bigger than a cancelled trade show

Last week, the industry would have converged in Barcelona for Mobile World Congress, but the GSMA cancelled the event due to health concerns tied to the outbreak of the virus.

On Thursday, IDC said the virus and its impact on supply chains will turn an expected smartphone recovery in 2020 into a year of decline. Late last year, IDC predicted smartphone shipments would improve by 1.5% in 2020, but it now believes shipments will decline by 2.3%. 

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