US operator Verizon reported revenues for 2018 up 3.8 percent and said it expects similar, low single-digit percentage growth in 2019. Adjusted EPS was better than expected, rising 26 percent to USD 4.71 thanks to tax benefits in Q4, but Verizon said it expects a negative impact this year from new accounting rules on leases. Capital expenditure will also increase this year as the operator ramps up its 5G roll-out.
Fourth-quarter revenues rose a slower 1.0 percent to USD 34.3 billion, as a 5.3 percent increase in hardware revenues offset a 0.1 percent dip in service revenue. Net earnings dropped to 47 cents a share from USD 4.56 a year earlier, due largely to the USD 4.6 billion in impairment charges for its online media business. On an adjusted basis, EPS rose to USD 1.12 from USD 0.86, helped by a USD 2.1 billion tax benefit from an internal reorganisation.
Verizon's EBITDA margin fell to 20.2 percent in Q4 from 25.4 percent a year earlier, dragged down by lower results at the wireline activities. The company said it's on track to reach its target of USD 10 billion in cumulative cost savings by 2021, of which USD 2.8 billion was achieved already by the end of 2018. These came mainly from capital efficiencies, and capex was reduced to USD 16.7 billion from USD 17.2 billion the prior year.
Higher capex, taxes in 2019
Verizon expects capex to increase to USD 17-18 billion this year as it expands commercial 5G services. Cash taxes will also increase by USD 2-3 billion after various one-time benefits in 2018. The US tax reform benefits last year helped the company grow operating cash flow by USD 10 billion to USD 34.3 billion over the full year.
EPS in the new year is expected to see a 1-2 percent headwind per quarter due to new accounting standards on recognising leasing assets. Excluding the accounting effect, Verizon said it expects flat adjusted EPS in 2019.
Verizon Wireless service revenue flat
At Verizon Wireless, service revenue growth slowed to just 0.1 percent in Q4, to a total USD 15.9 billion. EBITDA was still up 9.7 percent to USD 10.4 billion, pushing the margin up to 42.5 percent. The operator ended the year with 118 million retail connections, up 1.5 percent from 2017, but net additions were down 13 percent to 1.77 million, due largely to prepaid losses.
The number of postpaid accounts was little changed over the year at 35.4 million, but Verizon increased the average number of lines per account to 3.20 from 3.13. Average revenue per account fell 0.5 percent year-on-year to USD 135.11 in Q4.
Wireline in the red
At the wireline division, the drop in revenue slowed slightly from the previous quarter, to 3.2 percent to USD 7.4 billion. The group posted an operating loss of USD 273 million, compared to a profit of USD 62 million a year earlier, and the EBITDA margin dropped to 17.6 percent from 20.9 in Q4 2017.
Verizon lost fixed customers for all services in 2018, apart from the Fios fibre broadband, which grew by 3.7 percent to 6.07 million subscribers. In Q4, broadband net additions were just 3,000, as the loss of 51,000 DSL customers offset growth of 54,000 Fios subscribers. Fios also lost another 46,000 TV subscribers and 30,000 voice customers in Q4. Total fixed voice connections fell 8.5 percent over the year to 11.73 million.
