Verizon Promises Turnaround Amid Lull in Smartphone Upgrades

Verizon added more prime wireless customers in the latest quarter but reported a decline in  profit and revenue, a symptom of people taking longer to upgrade their older smartphones.

The wireless engine

The cellphone carrier, America’s largest by subscribers, ended the June quarter with 8,000 more postpaid phone connections as its growing business unit continued to offset a shrinking consumer division. Investors track the postpaid customer base, along with changes in prepaid-phone and home-internet subscriptions, to gauge telecom companies’ financial health.

Stiff competition from wireless and cable rivals has overshadowed Verizon’s steady profits of late. Its consumer division bled customers for most of the past year and a half, prompting the company to shuffle its C-suite and overhaul the way it markets wireless plans.

Total revenue fell 3.5% to $32.6 billion.

Verizon said the sales slump stemmed mostly from fewer smartphone upgrades, a trend that has persisted across the industry as users hold on to their devices for longer spans. Its core wireless service revenue rose 3.8% to $19.1 billion, fueled by wireless home internet growth, price hikes and the reclassification of some fee revenue.

The bottom line

Verizon’s overall profit fell to $4.65 billion from $5.2 billion a year earlier. On a per-share basis, the profit fell to $1.10 from $1.24, a figure that included severance costs tied to job cuts, among other expenses. Excluding one-time items, profit came in stronger than analysts had forecast. 

“The steps that we have taken to improve our operational performance are working, and we are confident that we will achieve our financial targets for the full year,” Chief Executive Hans Vestberg said in a news release.

Investor reaction

Verizon shares rose more than 2% in premarket trading.

Shares of Verizon and rival AT&T have foundered over the past year as weak revenue growth and large debt loads spook investors. The dividend-paying stocks have also struggled to draw investors as the Federal Reserve raises interest rates, a move that has fostered more high-yield investments competing for their attention.

Telecom stocks fell further in July after The Wall Street Journal investigation found that aging lead-lined telephone cables still crisscross the country. The market has recovered in recent days as the companies provided some details about the lines still in their networks, allowing Wall Street analysts to refine their estimates of potential cleanup costs.

Write to Drew FitzGerald at [email protected]