Verizon Expects Strong LTE Upgrades, Strong Net New Subscriber Growth, and a Hit to Earnings and Profit Margins
When is strong net new mobile subscriber growth, high take rates for Long Term Evolution fourth generation service and high conversion rates of the best existing customers to 4G service a problem?
When a highly-competitive environment means there is lots of promotional activity, even by a firm that eschews promotions.
So it is that Verizon Communications announced “strong momentum for wireless customer growth in the fourth-quarter 2014” and “very strong customer demand” for 4G smartphones and tablets on its “More Everything” shared data plans for the fourth quarter of 2014, at the same time it is warning that the company expects pressure on earnings and profit margins.
“The fourth-quarter impacts of its promotional offers, together with the strong customer volumes this quarter, will put short-term pressure on its wireless segment EBITDA and EBITDA service margin (non-GAAP, based on earnings before interest, taxes, depreciation and amortization) as well as its consolidated EBITDA margin (non-GAAP) and earnings per share,” Verizon said.
Such is the competitive environment that Verizon expects that financial pressure even as it expects higher retail postpaid gross additions, both sequentially and year over year.
About 75 percent of Verizon’s quarterly upgrades were “strategic or high-quality,” meaning they represented upgrades from a basic phone, a 3G smartphone or represented an upgrade by a high-value customer.
The percentage of customers choosing the “Verizon Edge” equipment-installment plan option in the fourth quarter of 2014 currently is 24 percent, double the rate of third-quarter 2014, when 12 percent of total phone activations. used the equipment installment plan.
“Total retail postpaid disconnects are trending higher both sequentially and year over year in this highly competitive and promotion-filled fourth quarter,” Verizon said.