Verizon's Subscriber Growth Plummets -- WSJ
October 21 2016 - 3:02AM
Dow Jones News
By Ryan Knutson and Anne Steele
Verizon Communications Inc. on Thursday reported declining
revenue and plunging subscriber growth, and said it is assessing
whether it will need to renegotiate its acquisition of Yahoo Inc.
after a major data breach.
Verizon's Chief Financial Officer Fran Shammo described the
recently announced breach of 500 million Yahoo accounts as
"extremely large."
He said the company is assuming that it will have a "material
impact" on Yahoo, suggesting that the carrier will look to
renegotiate the deal though he gave no indication Verizon intended
to walk away.
Mr. Shammo said Verizon lawyers had their first call with
Yahoo's lawyers this week and said evaluating the impact of the
breach is "going to be a long process."
The carrier, which has sought to develop new revenue streams via
acquisitions, in July said it would buy Yahoo's Web assets for
$4.83 billion in cash, the biggest of a recent string of digital
acquisitions. For New York-based Verizon, the deal is a key
component of a digital media and advertising empire the nation's
biggest wireless carrier is trying to build in hopes of taking on
Alphabet Inc.'s Google and Facebook Inc.
At the same time, Verizon's wireless business is sagging as
competitors gain strength. The carrier reported its second straight
quarterly revenue decline after six years of growth. It also posted
a 66% drop in net retail postpaid wireless subscribers from a year
ago, down to 442,000, which is also 28% lower than in the previous
quarter.
Shares, which were up 9% this year before the results, dropped
2.7% in early Thursday trading.
"We are executing in a very challenging competitive
environment," Mr. Shammo said on a call with analysts.
Verizon, which has been facing rising competition from smaller
rivals like Sprint Corp. and T-Mobile US Inc., has warned that
earnings may plateau in 2016 as it works through changes it has
made to keep its wireless plans in line with competitors. Sprint
this week reported strong subscriber growth for the quarter.
On its wireless business, the carrier had a net loss of 36,000
postpaid phone customers compared with gains of 430,000 a year ago,
a sign that a healthier Sprint and an aggressive T-Mobile are
inflicting pain on their larger competitor. Postpaid churn, or the
rate at which customers canceled service, rose 11 basis points to
1.04% from a year ago.
Mr. Shammo blamed some of the slowdown in subscriber growth on
the recall of Samsung Electronics Co.'s new Galaxy Note 7 over
issues with its batteries.
"We were off to a really good start with the Samsung Note 7,"
Mr. Shammo said. "And then unfortunately there was a total recall
of that phone which has definitely impacted our growth because
historically Verizon has always been the number one leader in
high-end Samsung phones."
For the September period, revenue slipped 6.7% to $30.94
billion, below estimates for $31.09 billion, according to Thomson
Reuters. Verizon posted a profit of $3.6 billion, down from $4
billion last year.
On Thursday, the company backed its forecast of earnings for
2016 -- excluding a 7-cent per-share dent from the work stoppage
during a union strike -- to remain flat with 2015.
Verizon has been shifting its wireless customers to noncontract
plans that have a cheaper monthly service rate but require
customers to pay full price for their device, usually in
installments. The percentage of phone activations on installment
plans rose to 70% from 67% in the second quarter. Verizon said it
expects that rate to remain consistent in the fourth quarter.
Write to Ryan Knutson at ryan.knutson@wsj.com and Anne Steele at
Anne.Steele@wsj.com
(END) Dow Jones Newswires
October 21, 2016 02:47 ET (06:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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