Verizon posted results Thursday that narrowly beat earnings expectations despite a year-over-year slump in net postpaid additions.
For the fourth quarter 2015, the company reported overall earnings of 89 cents per share on $34.25 billion in revenue, beating a Thomas Reuters consensus that put Verizon at 88 cents per share on $34.06 billion in revenue. Verizon’s figures were up from 71 cents per share on $33.1 billion in the same quarter last year.
The news came despite a year-over-year drop in quarterly retail postpaid net additions. Verizon reported 1.5 million net additions for the fourth quarter, down from 2 million in the fourth quarter 2014. Full year net additions totaled 4.5 million.
Verizon CFO Fran Shammo attributed the decline to the lack of revolutionary device launches in 2015.
“2014 was a unique year,” Shammo said. “You had a very different form factor come out from Apple and innovation from Samsung and LG… but we didn’t have that huge change in the handset this year that we saw last year.”
Shammo pointed out that though they were below 2014 figures, fourth quarter net additions were up from 1.3 million in the third quarter.
Verizon said net smartphone adds of 713,000 were partially offset by a net decline in basic phones, dropping postpaid phone net adds to a total of 449,000 in the fourth quarter. Tablet net adds totaled 960,000 in the quarter, and net prepaid devices declined by 157,000, the company said.
The retail churn rate dropped to 0.96 percent from 1.1 percent a year before, Shammo said.
In the fourth quarter, Verizon’s wireless business pulled in $23.7 billion in total revenue for an increase of 1.2 percent year over year. Full year wireless revenues totaled $91.7 billion, marking a 4.6 percent increase over 2014 figures.
While service revenues dropped 5.6 percent year over year to $17.2 billion, Verizon’s equipment revenues increased to $5.4 billion from $4.2 billion the year before.
Nearly 7.6 million phones were activated on device payment plans in the fourth quarter, raising Verizon’s total number of device payment connections to 25 million or about 29 percent of its postpaid phone base.
Verizon also saw an increase in the percentage of devices activated on installment plans to 67 percent, up from 58 percent the previous quarter. The percentage of phone activations on installment plans is expected to top 70 percent in the first quarter 2016, the company said.
Moving into 2016, Verizon said it expects a consolidated adjusted EBITDA margin consistent with its full-year 2015 results. The company also said it is planning capital spending in the range of $17.2 billion and $17.7 billion, including approximately $150 million for the properties to be sold to Frontier. Proceeds from the Frontier transaction will be used to pay down the company’s debts, Verizon said.
Taking a page from Sprint, Shammo also said Verizon will continue to reevaluate its balance sheet in 2016 to look for more savings.
“The wireless restructure this year was the first restructure we had really since the start of Verizon Wireless,” Shammo said. “Entering into 2016 we will continue on the path we’re on. There’s still a lot of work to be done around our cost structure.”
Shammo also said Verizon will continue its transformation into a company at the forefront of digital content, but warned that its new ventures will continue to weigh on the company through 2016.
Though he declined to provide concrete figures for the progress of Verizon’s new mobile video content platform go90, Shammo said the numbers have “surpassed what we thought we would have at this time.” Shammo said that go90 will likely not cross the line into profitability for another year or two, but said the company is primarily focused on growing “viewership not necessarily the profitably of the product” for the time being.
