Subscriber slump sends Verizon’s share price south
Shares in US carrier Verizon have slumped after the company announced it had fallen far short of expected new subscribers.
The miss adds to fears the mobile phone market is beginning to stagnate, with fewer consumers interested in incremental smartphone model upgrades.
Shares in the company opened down over two per cent in New York.
The numbers
Verizon has added a net 442,000 subscribers – those who pay their bills on a monthly basis – in the third-quarter, missing analysts expectations of 766,300.
Meanwhile churn – customer defections among subscribers – increased to 1.04 per cent of total wireless subscribers, compared with the average estimate of 0.99 per cent, according to FactSet, and up from 0.93 per cent a year earlier.
At the end of third-quarter 2016, Verizon Wireless had a total of about 35.8m device payment plan phone connections, representing about 41 per cent of the postpaid phone base.
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Total operating revenues in third-quarter 2016 were $30.9bn (£25.2bn), a 6.7 per cent decrease compared with third-quarter 2015.
Analysts had expected revenue of $31.14bn, according to Thomson Reuters.
The firm's wireless operations brought in revenues of $22.1bn in third-quarter, a decline of 3.9 per cent compared with the same period the year before, as more customers continued to choose unsubsidised device payment plans.
Fixed line revenue decreased 2.3 per cent, to $7.8bn, compared with third-quarter 2015, with fixed line retail consumer revenues growing 0.2 per cent, to $3.2bn, supported by bundled internet, telephone, and television revenue growth of 4.2 per cent.
Why it's interesting
The latest numbers put pressure on Verizon's media and advertising ventures to offset its maturing phone business.
The company has been emphasising quality to try and hold on to customers but is also pivoting the business to more digital, internet, and media avenues as the mobile market slows. It's looking to move into the video streaming business, bought up AOL last year and earlier this year landed internet giant Yahoo, amongst other deals. The changes are expected to put it in direct competition with the likes of Google and Facebook.
Investors were keenly watching for an update on Verizon's deal to buy Yahoo, though there was no mention of it in the earnings statement.
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Doubts about the deal have emerged since Yahoo revealed a massive data breach, involving 500m email accounts in 2014.
Verizon's general counsel has said the incident may represent a material event that could allow Verizon to back out of the deal though Yahoo's recent better-than-expected quarterly profit and customer trends data have helped to assure investors.
What the company said
Verizon chairman and chief executive Lowell McAdam said:
Verizon continues to deliver strong financial and operational results in highly competitive markets while positioning itself for future growth.
While we transform our company in a challenging environment, we have maintained the financial flexibility to invest in our industry-leading networks to better serve customers, add scale to bring innovation to the mobile media and Internet of Things markets, and increase dividends for a 10th consecutive year.
In short
Verizon needs to move quickly to diversify its business as the mobile market matures and growth in its core market slows. It's made some interesting moves but competition is tough.