The top U.S. wireless carrier Verizon (VZ, Financial) recently reported its third quarter 2014 results with mixed numbers. While Verizon’s revenue was in line with Wall Street estimates and topped analyst estimates, its earnings disappointed investors. The quarter also saw strong subscriber addition on the back of increased device lineup. A brief study of the quarter and some essential metrics would give a better picture of the company’s performance.
The quarter in a snapshot
Verizon’s total operating revenue for the quarter increased more than 4% over last year and came in at $31.59 billion, marginally beating analyst estimates of $39.58 billion. The telecom carrier earned $21.8 billion from its wireless business, which was up 7% from a year earlier, and generated $9.6 billion from the wireline segment. The mobile provider targets to sustain a 4% top line growth for the entire fiscal year. The executive vice president and CFO of the company Fran Shammo said that the solid operational performance during the quarter is the reflection of the company’s continuous effort and the ability to contend effectively in the face of intensifying competition.
The Big Red reported earnings per share of $0.89, lower than analyst forecast of $0.92. Though it might appear that Verizon’s earnings result fell short of estimations, the results are not as bad as one may thing. The quarterly earnings per share is an increase of more than 14% from a year go figure. This is the 11th consecutive quarter for the company for reporting double digit earnings growth. The company’s wireless operating margin was 31.9% and EBITDA margin stood strong at 49.5%.
The company also worked hard to stay ahead of competition from smaller rivals Sprint (S, Financial) and T-Mobile (TMUS, Financial) who started engaging in price-cut wars and other promotional activities to draw subscriber attention. In response, Verizon reduced prices for its More Everything plan, but reiterated that its primary goal remains to achieve “quality growth and profitability.”
The key highlight: Customer addition
Retail postpaid connection is the highlight of the quarterly result. The company posted strong customer addition in this period – credit goes to the solid number of tablet additions together with increase in sales of smartphones. The company added about 1.52 million retail net postpaid customers to its current subscriber base, pushing the total retail subscriber base to a staggering 106.2 million. Postpaid customers are the most attractive for carriers as they become a regular flow of income. Of the total addition, 1.1 million were tablet buyers and 457,000 were postpaid phones.
The company’s continuous to widen the 4G LTE device lineup by launching a variety of smartphones including the Apple iPhone 6 and 6 Plus, HTC One Remix, LG G Vista, and New Moto X. Apart from this, Verizon also introduced the Samsung Galaxy Tab 4 and Tab S 10.5 tablets.
The company’s investments in building the network infrastructure helps drive more of inventive products and services. The company’s capital spending came in at $12.6 billion for the first nine months of the fiscal year. For the entire year Verizon expects to capital expenditure to hover around $17 billion. All the four national U.S. carriers, including AT&T (T, Financial), Sprint, and T-Mobile, are heavily putting in money to develop the 4G LTE network to keep in pace with the growing demand for data. And here Verizon is at the forefront.
Parting thoughts
Verizon has a strong competitive position. As the holiday season approaches, the company can look forward to see some stronger growth in the fourth quarter and end the year on a solid note. It’s interesting to see how despite increasing competition Verizon manages to maintain its position and cement its lead in the wireless space.
