Verizon isn’t out of the woods yet. After showing a spark of improvement in Q4 2022 by posting positive net phone adds, the company is back to reporting postpaid phone losses. In Q1 Verizon lost 127,000 postpaid phone customers compared to Q4 2022, when the company reported 271,000 postpaid phone net adds.
Verizon’s Consumer division continues to show weakness. In Q1 the Consumer group lost 263,000 postpaid wireless phone subscribers. However, that was offset by the Verizon Business group, which reported 136,000 retail postpaid phone net adds in the quarter.
During the company’s earnings call with investors, CEO Hans Vestberg tried to spin the Consumer group losses into a positive story by touting Verizon’s total postpaid phone gross adds of 2.4 million in the quarter, which is an increase of 5.3% year over year. However, the company’s wireless retail postpaid churn rate also increased in the quarter to 1.15% from 0.95% in Q1 2022.
Vestberg also tried to assure investors that the company’s Consumer group is heading in the right direction, especially with the appointment of Sowmyanarayan Sampath, who was named CEO of Verizon Consumer Group in March. Sampath had been in charge of Verizon Business prior to his appointment. In addition, Kyle Malady, previously the company’s head of Global Networks & Technology, was named CEO of Verizon Business to replace Sampath.
Vestberg said that he and Sampath are aligned and believe that the answer to Verizon’s Consumer Group weakness is to “deepen segmentation and scale FWA.” He added that both Sampath and Malady have been with Verizon for many years. “We are much more focused with the new team,” he said.
However, Verizon also continues to rack up losses in its prepaid business. The company reported 351,000 retail prepaid net losses in Q1, which is an increase from the 175,000 net prepaid losses in Q4 2022. It’s retail prepaid churn for the quarter was 4.31% up from 3.69% in the same quarter in 2022.
According to Bill Ho, analyst with 556 Ventures, since Verizon’s Q4 2021 acquisition of prepaid operator Tracfone it has reported total net prepaid losses of around 796,000.
Vestberg reiterated what he’s said in the past regarding prepaid, that Verizon is still in the process of transitioning the Tracfone prepaid customers that were on other carrier networks to the Verizon network and he expects there to continue to be pressure on the prepaid net adds in Q2 before the company starts to see a turnaround. Nevertheless, he added that Verizon is “confident in value market opportunities.”
FWA’s Q1 Success Story
Fixed wireless access (FWA) remains a bright spot for Verizon. The company reported 393,000 FWA net adds in the quarter, bringing its total FWA subscriber base to 1.9 million. Of those 393,000 FWA net adds, 137,000 came from the company’s Business group. Vestberg said that the company is seeing traction from businesses that are turning to FWA as their primary source of broadband connectivity.
He also said that Verizon is going to start expanding its C-band deployment to more suburban and rural areas as more of the C-band spectrum that it acquired is cleared for Verizon’s usage. When asked about FWA capacity issues, Vestberg said that the company will be able to add more capacity as it expands its C-band deployment and that he is not concerned about capacity limitations for FWA.
Vestberg also emphasized the company’s $18.9 billion in wireless service revenue that it reported for the quarter, which is a 3% year-over-year increase. “We are focused on revenue generation,” Vestberg said.
The company’s Consumer Group reported operating income of $7.1 billion, a 3% decrease year over year and an operating income margin of 28.6%, which is down from 28.9% in the same quarter in 2022.
Verizon Business reported a revenue of $7.5 billion, a decrease of 2.8% year-over-year but Business group wireless service revenue was $3.3 billion, up 5.3% year over year.
Verizon reported total consolidated operating revenue of $32.9 billion, which was a decrease of 1.9% from first quarter 2022. Verizon attributed that decrease to lower equipment revenue and a decline in its wireline services in the Business Group.
The company also reported a net income of $32.9 billion, which is an increase of 6.5% from the same quarter in the previous year.