Verizon reported a further drop in results in the third quarter, as the operator's expansion into new services has yet to offset the tough competition on the mobile market. Operating revenues fell 6.7 percent year-on-year to USD 30.9 billion and were down 2.9 percent after adjusting for the divested landline activities. Operating profit fell 13.2 percent to USD 6.5 billion, and net earnings dropped to USD 0.89 per share from USD 0.99 a year ago.
The adjusted EBITDA margin was at 33.9 percent and Verizon said it still expects a stable full-year margin. The company also maintained its outlook for stable adjusted EPS, excluding the impact of the strike in Q2. In Q3, adjusted EPS fell to USD 1.01 from USD 1.04.
Verizon Wireless posted revenues down 3.9 percent to USD 22.1 billion, similar to the 4.0 percent fall in the previous quarter, as customers continued to opt for device instalment plans. Service revenues dropped 5.2 percent to USD 16.7 billion, and Verizon said it still expects to return to annual growth in service revenue by the end of 2017. Around 70 percent of phones sold in the quarter were on instalment plans, and a similar percentage is expected in Q4. Already 60 percent of postpaid phone customers are on unsubsidised payment plans.
Retail net additions slowed to 442,000 new postpaid customers in Q3, taking the total base to 108.2 million, up 3.0 percent from a year ago. The net growth came entirely from tablets (+221,000) and other devices (+257,000), mainly the Hum telematics device, while phone customers saw a net loss of 36,000 in the three months. Prepaid customers grew by 83,000 in the quarter but were down 4.9 percent year-on-year to 5.5 million. Verizon said IoT revenues rose 24 percent on an organic basis, but were still small, at USD 217 million in the quarter.
The drop in handset costs helped Verizon increase the wireless EBITDA margin to 44.9 percent from 43.2 a year ago, while total EBITDA was flat at USD 9.9 billion. Capital expenditure fell 5.1 percent to USD 2.8 billion.
Wireline revenues fell 2.3 percent to USD 7.8 billion, as continued weakness in the business and wholesale markets offset a 4.4 percent increase in sales from Fios consumer services. Recovering from the impact of the strike in Q2, Verizon added a net of 90,000 Fios Internet connections and 36,000 Fios Video connections in the third quarter. Fios revenue growth was driven by customers opting for higher speeds, with 16 percent now subscribing to 100 Mbps or higher compared to 11 percent in Q2. Cost controls in wireline helped EBITDA increase 10.9 percent to USD 1.7 billion.
