Verizon Adds Postpaid Phone Customers in Q4, Expects C-Band Gains
Verizon returned to positive postpaid phone adds in Q4, with net adds of 217,000, after losing subscribers in recent quarters. It reported retail postpaid net adds of 1.4 million, its “best single quarter performance in seven years.” Analysts said questions remain as Verizon fights for customers with AT&T, which reports Wednesday, and T-Mobile, which reports next week.
The numbers for post-paid adds don’t include the recent loss of more than 900,000 connections from the shuttering of Verizon’s 3G network, including 392,000 wireless retail postpaid phone connections, Verizon said in a footnote to its earnings released. The numbers also weren’t included in calculating a postpaid phone churn rate of 0.89%.
Many questions remain on the larger economy, CEO Hans Vestberg warned on a call with analysts. “The industry entered 2023 with continued macroeconomic uncertainty as elevated inflation and interest rates impact the broader economy,” he said. “Still, demand for our service remains strong, given the growing importance of mobility and broadband to both consumers and businesses.
“We have positioned ourselves to improve on our performance in 2023 and expect to build a good underlying operational momentum,” Vestberg said: “We're seeing some impact of high interest rates. ... We expect our capital spending to reduce significantly in 2023 as we reach the end of our incremental C-band spending, which will be a tailwind for free cash flow.”
Vestberg said Verizon’s advantages will become clearer as C band is fully deployed for 5G. “Not all networks are architected and built the same, nor have the same quality,” he said: “We have seen these differences in the past and expect that 5G will be no different.” Verizon engineers “have the best track record for designing and building networks that produce the best experience,” he said.
Verizon expects to cover 200 million POPs with C band this quarter and is “well ahead of schedule” to reach a 250 million targeted by the end of next year, Vestberg said. C-band propagation appears to be “very similar to that of AWS and PCS spectrum” already widely used by Verizon, he said. Verizon expects to have full access to C band in 330 markets this year, he said.
When Verizon turns on 5G in a full 200 MHz of spectrum, the carrier expects peak download speeds of 2.4 Gbps, up from the 900 Mbps today, Vestberg said: “By the end of the year, you should see a network with incredible speeds, both downlink and uplink, and position to deliver 5G capabilities such as network slicing, voice over 5G … among others.”
Verizon reported total broadband net adds of 416,000, including 379,000 for its fixed-wireless product. The company lost 80,000 net FiosTV subscribers, compared with a loss of 69,000 a year ago. Net income was $6.7 billion, up 41.4% from last year, on revenue of $35.3 billion, up 3.5%. With the C-band build further along, the carrier projects capital spending of $18.25 billion-$19.25 billion in 2023, down from $23.1 billion last year.
“Last August, we downgraded Verizon to Underperform on the expectation that they had no choice but to get down in the promotional mud with AT&T,” said MoffettNathanson’s Craig Moffett. “In December, we upgraded their shares back to Market Perform only because their trip into the mud seemed largely consensus by then, and seemed already fairly priced in. And now, here we are. Verizon is well and truly in the mud.”
“Revenue results were in-line,” New Street’s Jonathan Chaplin told investors: “Wireless adds were positive, but a little disappointing. … EBITDA guidance was disappointing.” Verizon projected adjusted EBITDA of $47 billion-$48.5 billion for the year.
Verizon “ended the year with stronger-than-expected retail postpaid net adds, a robust revenue beat, and earnings in line with expectations,” said Livy Investment Research: “Despite the upbeat results, Verizon remains far from achievements observed at rivals in recent quarters. Still fighting market share loss, 2023 might mark a make-or-break year for Verizon.”