Verizon (VZ, Financial) released its third quarter earnings on Thursday, which beat analysts’ estimates. The national telecom player reported earnings per share of $1.01, compared with a median estimate of 99 cents. The telecom company disappointed investors with operating revenue of $30.94 billion, however, which fell below expectations of $31.1 billion.
The result is also a reflection of the intensifying competition in the wireless and telecommunication industry from rivals such as T-Mobile (TMUS, Financial) and Sprint (S, Financial). Verizon’s shares trended lower in pre-market trading following the announcement of the results.Â
Quarter in a snapshot
Verizon’s third quarter earnings per share of $1.01 compared with $1.04 in last year's comparable quarter. It generated revenue of $30.94 billion, down 5.3% from last year. The company's revenue from wireless dropped 4% from a year ago to $22.1 billion.
In the earnings release, Verizon chairman and CEO Lowell McAdam acknowledged the rising competition and challenging environment. "We have maintained the financial flexibility to invest in our industry-leading networks to better serve customers, add scale to bring innovation to the mobile media and Internet of Things (IoT) markets, and increase dividends for a 10th consecutive year," he said.
During the third quarter, Verizon introduced LTE Advanced in around 460 markets and plans to launch a 5G fixed wireless broadband solution in its domestic market.
On the downside, it added net 36,000 Fios video customers, compared with analysts’ estimate of 59,000. In addition, the shift in demand toward customised streaming services from the traditional cable-TV bundles also increased demand for higher internet speeds. Net post-paid additions during the quarter were 442,000, lower than analysts much higher expectation of 875,000.
How the Yahoo deal is shaping up
Verizon is preparing to acquire Yahoo in a deal worth $4.8 billion. In 2015, it agreed to take over AOL to trigger growth in mobile video and advertising. However, Yahoo has had a massive data breach, impacting more than 500 million user accounts, which is making Verizon reconsider the deal.
During the conference call, Verizon’s chief financial officer Francis Shammo said it is an “extremely large” breach that would bear a “material impact on Yahoo. Verizon is working on gathering more information on the breach in order to get a better idea about the assets of the company it intends to acquire. Verizon is looking to conclude the deal in the first quarter of fiscal 2017, depending on the regulatory support and approval of Yahoo shareholders.
Last word
Verizon faces tough competition as smaller rivals Sprint and T-Mobile grow more aggressive in expanding their market share, which impacted the Big Red’s bottom line for the quarter. Presently, assessing the results of a combination with Yahoo is of critical importance to Verison, and will be seen in next quarter's numbers.
