January 25, 2021

Verizon’s revenue drops due to fewer subscriber additions

sprintVerizon Communications Inc added far fewer wireless subscribers than expected in the third quarter amid a price war with rivals in a saturated phone market and an effort to drive growth from its fledgling digital advertising and media business.
The company, whose $4.83 billion deal to buy Yahoo Inc’s core business was shaken by a massive data breach of Yahoo user accounts, said on Thursday total operating revenue fell 6.7% to $30.94 billion, from $33.16 billion.
Analysts had expected revenue in the quarter of $31.14 billion, according to Thomson Reuters I/B/E/S.
Shares of the No.1 US wireless company, up about 6.5% this year so far, slipped 2.3% to $49.23 in morning trading.
Verizon said it added a net 442,000 retail postpaid subscribers, who pay their bills on a monthly basis. This was significantly below analysts’ estimated 766,300, according to market research firm Fact Set Street Account.
Subscriber growth in the third quarter was hurt by the recall of the Samsung Note 7 smartphone  due to the risk of overheating and catching fire, and a backlog in orders for Apple’s new iPhone 7, Verizon executives said.Apple’s new iPho
Smaller rivals, such as T-Mobile US Inc and Sprint Corp, have rolled out aggressive promotions to win over Verizon’s subscriber base.

As the company bids to fend off competition in a maturing wireless market, it acquired AOL in 2015 and plans to buy Yahoo to acquire a set of digital web properties and ad technology tools that will help it compete with internet giants Facebook Inc and Alphabet Inc’s Google.
“It will take years to find out if their advertising strategy pans out,” MoffettNathanson analyst Craig Moffett said in a note.

Verizon’s general counsel has said that the Yahoo data breach reported in September, which involved 500 million email accounts, represented a material event that could allow Verizon to back out of the deal.

 Verizon is still evaluating what the data breach means for the Yahoo transaction, Verizon’s Chief Financial Officer Fran Shammo said in an interview.

 “We’re going to have to wait to see and get the facts…before any final decision is made,” Shammo said.

 Net income attributable to Verizon fell to $3.62 billion, or 89 cents per share, in the third quarter ended Sept. 30, from $4.04 billion, or 99 cents per share, a year earlier.

 Excluding items, the company earned $1.01 per share, beating the average analyst estimate of 99 cents per share.