Why Verizon Believes Its Wireline Margins Will Expand

Why Verizon Believes Its Wireline Margins Will Expand http://marketrealist.com/2016/11/verizon-believes-wireline-margins-will-expand/?utm_source=yahoo&utm_medium=feed&yptr=yahoo

By Andrew Smith

| Nov 18, 2016 2:36 pm EST

Verizon’s wireline segment: EBITDA rose in 3Q16

In 3Q16, Sprint (S) and T-Mobile (TMUS) gained a chunk of postpaid phone subscribers. That had a negative impact on Verizon’s (VZ) 3Q16 wireless segment’s operating margin. The segment generated ~$1.7 billion of adjusted EBITDA (earnings before interest, tax, depreciation, and amortization), which was a rise of 10.1% on a YoY (year-over-year) basis.

Its wireline segment’s adjusted EBITDA margin was 21.2% in 3Q16 compared to 18.9% a year ago. It was driven by a faster-than-expected recovery following the strike in 2Q16. The main reason for the rise was primarily growth in Verizon FiOS (Fiber Optic Service) and the cost management measures taken by Verizon.

Total revenues for Verizon FiOS rose 4.4% on a YoY basis in 3Q16. Verizon added 90,000 FiOS Internet subscribers and 36,000 FiOS video subscribers that quarter. FiOS Internet and video penetration were 40.4% and 34.5%, respectively

Verizon expects the new union contract negotiated in the wake of the strike to generate total cash savings of $500.0 million from 2017–2019. As a result, Verizon is optimistic about its wireline segment’s EBITDA margin growth in the coming years.

Wireline strike had a negative impact on Verizon

Although Verizon’s wireline margins improved in 3Q16, the story was different in 2Q16. Verizon’s wireline segment’s adjusted EBITDA margin was 14.0% in 2Q16 compared to 18.7% in 2Q15, which was a pretty large fall. The main reason for the fall was the seven-week work stoppage from the strike in its wireline segment in 2Q16. The strike resulted in a $0.07 per share hit to its earnings.

The company suffered from a backlog of FiOS installations due to the strike. The work stoppage impacted FiOS connection growth, and the company lost 13,000 FiOS Internet subscribers and 41,000 FiOS video subscribers in 2Q16.

Despite this setback, FiOS revenues for Verizon rose 3.7% on a YoY basis in 2Q16. To boost its FiOS business further, Verizon acquired XO Communications earlier in 2016 for $1.8 billion. XO will provide Verizon with fiber-optic networks in some US markets.

In 2Q16, Verizon also divested its wireline operations in California, Florida, and Texas to Frontier Communications (FTR) for about $10.0 billion

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7 replies (most recent on top)

Wireline is profitable. Hahaha...too bad Shamwow and McDumb@ss sold it all off. Now they have a tiny sliver in the northeast corner.

@Kq6DC0c-2fxo Your poll shows they will pay more for superior service in their home where they spend quality life with family and friends. Wireless is mobile, and it assumed, hit or miss for the most part. You don't want hit or miss in your home.

Lowell McAdam truly is an evil bastard, and at his advanced age, doesn't care that he destroyed Verizon. As another poster correctly stated, Ivan seidenberg had correct vision. Wireless has peaked, and with new wireless companies coming up monthly, the future is FIOS, something Mr. Enron McAdam has done his best to kill. He should be fired, but he will soon retire with several billion dollars while the ship sinks into the Atlantic ocean.

I work in the NYC boroughs and my wireless carrier poll shows me that very few, and I mean like next to no-one in some areas has Verizon Wireless as a carrier.

The number one reason they are not with Verizon.....Too expensive. Even though they say Verizon Wireless service is superior to other carriers

Now, everyone either wants or has FIOS in the outer boroughs. and even though Verizon is considered to be more expensive than to other providers. The number one reason they want Verizon FIOS.......Superior Service.

Go figure.

Money has tightened in the wireless sector. It was very easy money for Verizon Wireless. People were throwing money at them. They didn't have to compete. They are a very different company with competition. They have not been in this position with wireless. They were somewhat with wireline with the breakup into the baby bells. They were ahead for a while , had PSC regulation (guaranteed money).

People had a vision back then, those people are gone . The only ones left are people who nothing more then wireless and only when things were going good. They don't have the business to adjust business strategy.

They will lose more before they get business people in place who were not there when they had the " king of the mountain syndrome".

Ivan had it right but they pushed him out so Mr. Wall St could come in and sink the company for short-term profits.

Wireless communications growth has hit a wall, Not to mention the market is saturated, these are not my words they are Wall Streets words. As we all know what Wall Street says matters. And Wall Street is now saying that there is growth in Wireline industry and zero in wireless. Oh, how the tide has turned.

Verizon has sold off almost 20 states of wireline in the last 8 years to feed their golden child wireless and to pay for their $150 Billion dollar buyout of Vodafone wireless communications.

Where are our competent leaders with the correct vision for our future?

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Why Verizon Believes Its Wireline Margins Will Expand

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