Federal Workforce Cuts a Challenge for Verizon Growth
Verizon is seeing a continuing hit from the current administration’s cuts to the federal workforce, CEO Hans Vestberg acknowledged Monday as the company announced Q2 results. Verizon was the first of the big three carriers to release quarterly results.
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Postpaid wireless churn was 0.90%, which reflects “the lingering effects of our pricing actions and ongoing pressure from federal government accounts,” Vestberg said on a call with analysts. CFO Tony Skiadas said Verizon Business net adds were 42,000 in the quarter, down from 135,000 in the year-earlier quarter. “A significant majority of the year-over-year decline was driven by the public-sector business,” he said.
The company reported 51,000 wireless retail postpaid phone net losses in the quarter, compared with 109,000 postpaid losses a year ago. It also had 50,000 prepaid wireless net adds.
The call was Verizon’s first since Congress passed the massive reconciliation package, which restored the FCC’s general auction authority after it lapsed in March 2023 and mandated a pipeline of 800 MHz of spectrum for eventual auction (see 2507070045).
“We're sitting on a really good position on spectrum” with C-band, millimeter wave and low-band holdings, Vestberg said. However, the U.S. needs more licensed spectrum, especially headed into 6G, “in order to stay competitive and be the most digitalized country in the world.” Verizon will look at whether buying spectrum is a better use of its capital resources than building out existing licenses, he added. “That's the comparison we're always going to do when we see spectrum in the market.” He noted that new bands will take time to bring to market.
Verizon is also benefiting from the U.S. tax reform in the reconciliation package, which allows companies to immediately write off the full cost of certain new equipment, Skiadas said. Partly as a result of tax reform, Verizon will boost free cash flow by up to $2 billion this year, leading it to increase its forecast for that metric to between $19.5 billion and $20.5 billion, up from $17.5 billion to $18.5 billion. Verizon also raised its guidance on earnings for the year.
Following approvals from the FCC, DOJ and eight states, Verizon remains on track to complete its $20 billion purchase of Frontier early in 2026, Vestberg said (see 2505160050). That timetable hasn’t changed, he said.
“We’re encouraged by Frontier’s performance and look forward to closing the transaction to further accelerate our fiber expansion,” Vestberg said, adding that Verizon will provide more details before closing the deal.
He also noted that the company is surpassing its network buildout targets. “C-band deployment is ahead of schedule, our fixed wireless base has surpassed 5 billion subscribers, and our fiber build is tracking” ahead of plans.
Among other financial results, the carrier reported operating revenue of $34.5 billion in Q2, up 5.2% year over year, which beat consensus estimates. Earnings per share also beat estimates at $1.18, compared with $1.09 last year. Verizon’s total fixed wireless access additions were 278,000 in the quarter, down 26.5% from a year ago, and it had 293,000 broadband net adds.
Following the call, MoffettNathanson’s Craig Moffett told investors that it’s increasingly difficult to explain Verizon’s strategy. “Verizon certainly wouldn’t concede that their network is no longer ‘the best,’ but most observers in wireless … give that title to T-Mobile,” he said. “Nor do they have the lowest prices; indeed, their prices are often the industry’s highest.” Verizon “appears to be pursuing a ‘little of everything’ approach,” Moffett said. “That’s not a bad course of action, to be sure. It’s just a tough one to explain.”