New York, NY – Verizon Communications showed signs of improvement in its consumer business during the first quarter, marking a shift from years of decline. However, despite the positive performance, the stock saw a decline of 3.1% to $39.22 on Monday, as investors remained cautious about potential impacts from the conclusion of a government program offering subsidies for internet services, among other factors.
In the first three months of 2024, Verizon reported a net loss of 158,000 users in its consumer wireless postpaid phone business, showing an improvement from the 263,000 users lost in the same period last year. The telecom industry, including competitors like T-Mobile and AT&T, has been fiercely competing for customers as demand stabilizes post the pandemic surge, prompting Verizon to implement strategic measures such as appointing Sowmyanarayan Sampath to lead its consumer group.
The company introduced myPlan, allowing users to personalize features according to their needs, and offered incentives like a pack of streaming services with select plans, including Disney+ and Hulu free for six months. In the first quarter, Verizon’s Business Group added a net 90,000 postpaid phone users, reflecting around 22% of annual revenue compared to the consumer division’s 76%.
Management at Verizon expressed optimism for continued growth driven by factors like increased phone usage among younger demographics and businesses utilizing cell phones for services like curbside pickups. Despite losing 68,000 monthly bill-paying wireless phone subscribers in the first quarter, the figure was better than the expected loss of 100,000 predicted by analysts surveyed by FactSet.
Investor concerns arose around the potential impact of the Affordable Connectivity Program ending, offering discounted internet services to low-income families, affecting Verizon’s 1.1 million prepaid ACP users. The company’s financial forecasts did not include the potential loss from the subsidy program’s conclusion, but executives mentioned services revenue could be impacted by up to 50 basis points.
Verizon reported free cash flow of $2.7 billion for the first quarter, lower than the previous quarter and analysts’ expectations, raising concerns among investors. The company, however, expects cash flow to improve throughout the year, similar to 2023 when it reached $18.7 billion, citing historical trends of improvement in the second and third quarters. Net debt for Verizon stood at $147.3 billion, consistent with levels from the past three years.
Despite the challenges, Verizon maintained its 2024 financial outlook, expecting adjusted earnings per share of $4.50 to $4.70, aligning with analyst estimates. In the first quarter, the company reported adjusted earnings of $1.15 a share, slightly beating expectations, while operating revenue fell slightly below Wall Street’s projection due to decreased wireless equipment revenue.
As Verizon navigates through market dynamics and evolving consumer trends, attention now turns to upcoming reports from rivals AT&T and T-Mobile. AT&T is due to report on Wednesday morning, followed by T-Mobile’s report on Thursday, which could provide further insights into the competitive landscape of the telecom industry.