Verizon Adds Subs, Faces Growing Competitive Pressure

5G smartphone adoption has grown about twice as fast as 4G, with about 25% of Verizon’s customer base now having 5G-capable devices, CEO Hans Vestberg said Wednesday. Postpaid growth continued, but Vestberg warned of growing competitive pressures in wireless. Executives declined to comment on their spectrum strategy or holdings with the 3.45 GHz auction underway. AT&T reports Q3 results Thursday.

The wireless industry is competitive, Vestberg said on a call with analysts. “Broadband and mobility” are some of “the most important infrastructure for any person in this country and in the world,” he said: “5G is scaling, the economy is strong. So, of course, that’s a moment where we see a lot of competition. … If you look at our numbers, we are competing extremely effectively.” The carrier's C-band capital expenditures topped $1 billion through Q3, with $2 billion of equipment on order, said Chief Financial Officer Matthew Ellis.

Vestberg said there have been supply chain “challenges,” but Verizon is “getting around all of it.” Major gear needed to start C-band deployment is “already secure” and in the warehouse, he said. “We do long-term planning with our suppliers years back.” With millimeter wave, fiber and C band, Verizon has never done more deployments than it is doing now, he said.

Verizon had continuing wireless customer growth, adding 429,000 postpaid wireless phone subscribers, compared with analyst estimates of 342,000. Postpaid churn was 0.74%, which is below pre-COVID-19 pandemic levels. Verizon picked up some subscribers through the FCC emergency broadband benefit, but “in terms of our gross adds, new customers coming in, it’s a very small portion of that,” Ellis said.

Operating revenue of $32.9 billion was up 4.3% over last year, and profit of $6.6 billion a 46% gain. It had 98,000 Fios internet net adds and 68,000 Fios video net losses. Fixed wireless net adds were 55,000 in Q3, for a total of 150,000.

Capital expenditure is expected to hit $17.5 billion to $18.5 billion for the year “including the further expansion of 5G mmWave in new and existing markets, the densification of the 4G LTE wireless network to manage future traffic demands and the continued deployment of the company's fiber infrastructure,” Verizon said.

Trouble looms, warned MoffettNathanson’s Craig Moffett. “A post-COVID service revenue growth recovery has already begun to slow, and incremental revenue streams from 5G are still uncertain,” he told investors: “Industry structure, which once appeared to be getting better … is now arguably getting worse, as we now arguably go from three to five with the emergence” of cable and Dish Network wireless offerings. T-Mobile’s 5G service is “increasingly viewed as better than Verizon’s for coverage, speed, and reliability” and the company’s ultra-wideband service “currently accounts for just one half of one percent of the time 5G users are connected,” he said.

New Street’s Jonathan Chaplin said the results were “strong,” but Verizon faces growing competition. “We had expected increasing gains from T-Mobile and Cable to pressure subscriber trends at Verizon as the year progressed,” Chaplin said. “We think Verizon is apt to lose share as switching comes back late this year into next; moreover, competition in wireless … may heat further from here, forcing Verizon [management] to either accept uninspiring subscriber results or cut price.”