Verizon reported first-quarter earnings of USD 1.11 per share, up from 84 cents a year ago, helped by the US tax reform and new accounting standards for revenue recognition. Revenues rose 6.6 percent to USD 31.8 billion and were 3.2 percent higher on an organic basis. Wireless service revenues were still down 2.4 percent year-on-year, but Verizon said the result excluding the accounting impact was flat over the quarter and positive in March.
The US operator slightly improved its outlook for the full year, saying it now expects a return to positive service revenue growth by the end of 2018. Total revenue and adjusted EPS growth are still expected in low single-digit percentage rates in 2018, while reported EPS will jump an estimated 55-65 cents thanks to the tax reform. The tax savings will also add USD 3.5-4.0 billion to cash flow.
Adjusted EBITDA reached USD 11.7 billion in Q1, giving a margin of 37.1 percent. Excluding the impact of the new accounting standard for revenue recognition, Verizon said adjusted EBITDA rose by half a billion dollars from a year ago, while the margin was 35.8 percent, down 70 basis points year over year due to higher mobile equipment revenue and the inclusion of Yahoo. The company said it realised USD 200 million in cost savings during the quarter, as part of its four-year plan to save USD 10 billion in cash.
Capital expenditure jumped to USD 4.6 billion from USD 3.1 billion a year ago, and is expected to reach USD 17.0-17.8 billion over the full year, including the costs of a commercial launch of 5G. Operating cash flow showed a strong improvement in Q1, to USD 6.6 billion from USD 1.4 billion in Q1 2017, on lower charges for acquisitions and reduced pension contributions. Verizon said it made a USD 1 billion discretionary contribution to its pension fund in Q1 which means it should not face any mandatory payments until 2026.
The operator took another USD 107 million in restructuring charges for Oath in the quarter. The online business formed from AOL and Yahoo contributed revenues of USD 1.9 billion, down 13 percent from Q4 2017, which Verizon blamed on seasonal weakness in the display ad market.
Wireless margin improves, customer growth slow
At Verizon Wireless, revenues totaled USD 21.9 billion, up 4.7 percent from a year excluding the accounting change. Verizon said service revenues improved throughout the quarter. After EBITDA of USD 10.5 billion, the margin improved to 47.8 percent from 45.1 percent a year earlier and was up 120 basis points excluding the accounting change.
Customer growth slowed considerably from Q4, but was better than the losses in Q1 2017 in the postpaid market, with 260,000 retail postpaid net additions. That consisted of net phone losses of 24,000 and tablet losses of 75,000, offset by 359,000 other connected devices gains, primarily wearables. Postpaid smartphone net additions for the quarter were 220,000, while postpaid ARPA fell 3.8 percent year-on-year to USD 131.71. After prepaid customer losses of 335,000 in Q1, the company had a total customer base of 116.18 million at the end of March, up 2.0 percent from a year earlier.
In the wireline market, Verizon's revenues fell 1.6 percent to USD 7.6 billion, including a 3.1 percent fall at the enterprise division and 1.6 percent lower consumer revenues. The comapny said Fios revenues were still up 1.9 percent year-on-year excluding the accounting impact. EBITDA totaled USD 1.6 billion, and the margin dipped to 21.2 percent from 21.9 a year ago.
While Fios broadband additions improved to a net 65,000, nearly double the year-earlier intake, video losses swelled to 22,000, a result of increased cord-cutting, Verizon said. The company also lost 59,000 DSL suscribers and another 266,000 voice lines in the quarter.
