Verizon Stock Down as Some Worry on C-Band Spending

Verizon had mixed results, as the first major carrier to report Q4 Tuesday. One overhang, analysts said, is how much Verizon spent in the FCC C-band auction. Executives couldn’t comment during the FCC quiet period. They expect the TracFone buy to close in the second half of the year. The stock closed 3.2% lower Tuesday at $56.57. AT&T reports Wednesday morning.

COVID-19 creates uncertainty for financial guidance, “but some things we know,” CEO Hans Vestberg told analysts. Roaming charges "will continue to be a headwind" this year and fewer customers will switch providers because of low store traffic, he said. There’s “a lot of excitement around 5G” with Verizon’s Ultra Wideband 5G network available in parts of 64 cities, he said. Initially, the company targeted very dense urban areas and stadiums, he said. Vestberg said migration to 5G is “equal to or better” than what happened with 4G a decade earlier: “We have a big year in front of us.”

There were 279,000 net phone additions, below analyst explanations. Postpaid churn was .96%. More than 90% of new accounts have unlimited service, the company said. Consolidated Q4 operating revenue was $34.7 billion, down 0.2% from last year. Profit fell 9.6% to $4.7 billion. Wireless service revenue growth and gains at Verizon Media “were offset by lower wireless equipment revenue and ongoing declines in legacy wireline products.” Verizon projected capital spending of $17.5 billion-$18.5 billion this year.

“Verizon has been due to give up value for a much bigger than expected auction spend,” New Street’s Jonathan Chaplin told investors. It's expected to spend at least $29.4 billion, plus $5.6 billion in clearing costs, which is $20 billion more than projected, the analyst said: “They will get what investors expected it will just cost them more.”

“Deploying their new C-Band spectrum, which by any reasonable definition is very high frequency spectrum, will be very expensive,” said MoffettNathanson’s Craig Moffett. Some suggest Verizon and other C-band bidders “will face pressure to deploy the spectrum as quickly as possible, accelerating capital spending," he said. "Higher leverage will mean that capital spending will, by necessity, be pinched and stretched.”