Tuesday, April 21, 2015

Still No Sign Mobile Marketing War is Denting Verizon Revenue, Margin

At least so far, it is hard to see the margin-reducing or revenue-reducing impact of the U.S. mobile marketing wars on Verizon Communications.

If revenue growth is the key metric for most tier-one communications service providers, Verizon Communications was a winner in the first quarter of 2015. Operating revenue grew 3.8 percent. Operating profit margins were up slightly, year over year.

Mobile segment revenues grew 6.9 percent, year over year, while operating income profit margins were flat. Postpaid customer churn improved, both quarter over quarter and year over year.

Perhaps more surprising, fixed network revenues grew four percent, year over year.

Wireline operating income margin was 4.3 percent in first-quarter 2015, up from 1.5 percent in first-quarter 2014. Segment EBITDA margin (non-GAAP) was 22.7 percent in first-quarter 2015, compared with 22.5 percent in first-quarter 2014.

With AT&T also reporting first quarter 2015 results soon, we will have a better handle on what is happening, at the firm level, in the U.S. mobile market, especially regarding the source of T-Mobile US net customer gains, and the impact of promotions on Sprint and T-Mobile US revenue and profit margin.

So far, it is hard to see negative impact at Verizon.  

FiOS Internet penetration (subscribers as a percentage of potential subscribers) was 41.5 percent at the end of first-quarter 2015, compared with 39.7 percent at the end of first-quarter 2014. In the same periods, FiOS Video penetration was 36.0 percent, compared with 35.0 percent.

By the end of first-quarter 2015, 62 percent of consumer FiOS Internet customers subscribed to FiOS Quantum, which provides speeds ranging from 50 to 500 megabits per second, up from 59 percent at year-end 2014. The highest rate of growth is in the 75-megabit-per-second tier, to which more than 20 percent of FiOS customers subscribe.

Broadband connections reached 9.2 million at the end of first-quarter 2015, a 2.4 percent year-over-year increase.

Net broadband connections increased by 41,000 in the first quarter of 2015, as FiOS Internet net additions more than offset declines in DSL-based high speed access connections.

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