Verizon Financials Improve; Tracfone Buy Questioned
As Democratic senators raised concerns on Verizon's buying Tracfone, Verizon CEO Hans Vestberg said Wednesday during a quarterly call the deal remains on track to close late this year. Vestberg said Verizon is returning to near pre-pandemic activity at its stores and on its 5G urban network. The company was the first of the major carriers to report Q2 earnings.
Senate Consumer Protection Subcommittee Chairman Richard Blumenthal of Connecticut and other Democrats pressed the FCC Wednesday to “thoroughly review” the Tracfone deal and secure “long-term, binding” Verizon commitments that it won't “raise prices for consumers, harm the Commission’s universal services programs, or undermine” workers. The others are Finance Committee Chairman Ron Wyden of Oregon, Dianne Feinstein of California, Ed Markey of Massachusetts and Sheldon Whitehouse of Rhode Island.
“We are concerned that Verizon does not have a sufficient record on supporting Lifeline for its current wireless services and has provided few enforceable commitments to the FCC within the proposed TracFone transaction,” the lawmakers wrote acting FCC Chairwoman Jessica Rosenworcel. “While we note Verizon’s stated goal of maintaining these services, Verizon would have significant incentives and opportunities to push subscribers from Lifeline and inexpensive prepaid services to higher revenue plans.” The FCC didn’t comment.
The Tracfone deal “will bring value and benefits to value-conscious consumers in a myriad of ways,” Verizon said in a statement. “Lifeline is foundational to the acquisition, and in response to calls for time commitments, Verizon has committed to the Lifeline program for at least three years.” The Tracfone buy is “tracking according to plan with the process that we need to go through,” Vestberg told analysts: “The team is responding to all the questions asked.”
Verizon is on track to add up to 8,000 C-band sites by year-end, Vestberg said. Verizon said it spent more than $160 million to prepare for the C-band launch in the first half of 2021. Almost all the new phones people are buying are capable of using the C band when it’s turned on later this year, Vestberg told CNBC. Verizon raised questions after bidding $45 billion in that auction, with an additional $8 billion due in incentive payments to satellite operators (see 2103040034).
Verizon's profit was $5.95 billion compared with $4.84 billion in the year-ago quarter. Operating revenue rose to $33.76 billion from $30.45 billion. The company is now predicting wireless service revenue growth of 3.5%-4% for the full year, compared with past guidance of 3%. It had 197,000 retail postpaid net adds, with postpaid churn at 0.65%. Verizon added 92,000 consumer Fios customers.
Verizon’s numbers were strong but may not be sustainable, MoffettNathanson’s Craig Moffett wrote investors. “Competitive intensity looks poised to worsen,” he said, noting Dish Network’s new network agreement with AT&T (see 2107190003). “By giving Dish a long-term” mobile virtual network operator “agreement that allows for precisely the same kind of selective offload that Verizon’s deal gives Cable, AT&T has given Dish a nearly assured path to becoming a serious long-term competitor,” he said: “And a long-term price cutter.”
Verizon’s numbers were better than expected, said New Street’s Jonathan Chaplin. “Retention promotions are helping subscriber trends; churn was low, and most of the add beat came from churn; however, margins were fine,” he said: Verizon’s low churn rate “certainly makes life more challenging for the share takers.”