Verizon Faces Challenges: Revenue Miss and Subscriber Losses Amid Changing Market Dynamics

Verizon sounds the alarm on a trend that is hurting its pockets

Verizon (VZ) has just revealed that it is facing a dip in its earnings, and one of the main culprits is an unexpected change in consumer behavior. In its second-quarter earnings report for 2024, Verizon revealed that it generated a total operating revenue of $32.8 billion during the quarter. Even though this is a 0.6% increase from the same time period last year, it falls short of the $33.06 billion analysts estimated, according to LSEG data. Related: Spectrum customers show company the consequences of hiked prices Wireless customers aren't upgrading to new devices as often Verizon stated in the report that the revenue growth was "offset by a decrease in wireless equipment revenue due to lower upgrade volumes," which means that fewer customers are switching out their old phones for newer ones. During an earnings call that discussed the report, Verizon Chief Financial Officer Tony Skiadas revealed that total upgrades during the second quarter declined by roughly 13% year-over-year. Verizon CEO Hans Vestberg claimed during the call that the amount of customers upgrading phones has been "a bit low for a while," and that the increased quality of phones is partially to blame. "We are going to see what's going to happen in this cycle, I don't feel very worried about it," said Vestberg during the call. "I feel that we are in a great position to handle it." Even though the company is experiencing historically low phone upgrades, Apple's upcoming iPhones, which will include new artificial intelligence features, may help reverse the startling trend. Higher phone bills are increasing churn Verizon also told investors during the call that its consumer post-paid phone churn, which is how many wireless customers stopped doing business with the company, was at 0.79% this quarter, which is a slight increase from what it reported during the same quarter in 2023. "This was in-line with our expectations as we recently implemented several price increases that are expected to generate well over $1 billion in annualized wireless service revenue," said Skiadas during the call. "We believe the majority of the pricing churn is now behind us and we continue to expect full-year consumer postpaid phone churn to be flat or slightly better than last year." Verizon's most recent price increases took effect in March this year. The price for multiple older Verizon unlimited plans such as 5G Get More, 5G Start, 5G Play More, 5G Do More, etc., increased by $4 a month per line, so it is no surprise that the company is seeing a slight increase in churn. More Technology: Consumers across the nation have been tightening their spending amid record inflation and a rough housing market. One of the main areas that consumers have restricted their spending on discretionary items, including tech products such as phones and computers. According to a 2023 CNBC and Morning Consult survey, more than half of the respondents said that they have reduced spending on electronics such as phones and computers due to inflation. This was more noticeable among lower-income Americans -- two-thirds of that demographic said that they were making cuts to that category. Related: Veteran fund manager picks favorite stocks for 2024

Verizon misses quarterly revenue estimates on slow phone upgrades

Verizon reported second-quarter revenue of $32.8 billion, compared with analysts' average estimate of $33.06 billion, according to LSEG data. Analysts have said Verizon is reeling from a historically low number of people upgrading their phones, although that could change when Apple releases its latest iPhones with artificial intelligence (AI) features, later this year. Generative AI smartphones will be the next driver of growth for the smartphone market in the second half of the year after 5G and foldables, research firm IDC said last week. Verizon said it added 148,000 net monthly bill-paying wireless phone subscribers from April to June, above analysts' average estimate of 127,870 additions, according to Visible Alpha. It had lost 68,000 subscribers in the prior quarter. The company's myPlan, which was launched in May last year and allows customers to pay for only what they need, has helped it compete better with AT&T and T-Mobile US in the tightly controlled U.S. telecom market. Verizon also partnered with streaming services to offer promotional bundles from platforms such as Netflix, Warner Bros Discovery's Max and Disney's services. It even raised the price of some older plans in March to prompt customers to switch to the new plans. The company's consumer business reported net losses of 8,000 wireless retail postpaid phone subscribers in the latest quarter, compared with 136,000 losses a year earlier. Excluding items, Verizon earned $1.15 per share, in line with expectations. (Reporting by Harshita Mary Varghese; Editing by Savio D'Souza and Shinjini Ganguli)

Verizon hit by prepaid subscriber exodus after internet subsidy ends

ACP had offered internet subsidy to 23 million households in the United States who otherwise would not have been able to pay for connectivity, and now telecom carriers are bracing for a hit after it ran out. Shares of AT&T, T-Mobile US and Charter Communications and Comcast were down between 1.3% and 3%. "That (the stock move) reflects people concluding ACP impact is worse than expected. It's not just relative price, it's also relative exposure and the cable operators are significantly exposed as well," MoffettNathanson analyst Craig Moffett said. Verizon's second-quarter revenue of $32.8 billion missed LSEG estimate of $33.06 billion, as the company also grappled with a historically low number of people upgrading their phones. Still, there were some positive signs for Verizon. Finance chief Tony Skiadas said on a post-earnings call the majority of disconnections due to ACP expiry had already happened, which means the impact would likely be less in the next quarter. Analysts believe phone upgrade activity could pick-up when Apple releases its latest iPhones with artificial intelligence (AI) features, later this year. Verizon's myPlan, which was launched in May last year and allows customers to pay for only what they need, is also seeing strong adoption from customers. It helped Verizon add 148,000 net monthly bill-paying wireless phone subscribers from April to June, above estimates of 127,870 additions, according to Visible Alpha. The company had lost 68,000 subscribers in the previous quarter. (Reporting by Harshita Mary Varghese; Editing by Savio D'Souza and Shinjini Ganguli)