Verizon reported net profit for the first quarter up 25.4 percent to USD 5.4 billion. The increase was driven by its cost savings programme and a recovery in the B2B market following restructuring there. Revenues rose 4.0 percent to USD 32.9 billion, as growth in broadband and business services as well as higher equipment sales helped offset a drop in the number of mobile customers.
CEO Hans Vestberg said the company was "off to an excellent start in 2021", with growth in all three of its business segments despite intense competition. The goal of USD 10 billion in cost savings first announced in 2018 was achieved in Q1, ahead of the target of end-2021. Despite one-time losses on the Jetpack recall and a sale of spectrum licences, EPS rose 27 percent to USD 1.27, and adjusted EPS improved to USD 1.31 from USD 1.26 a year ago.
The company maintained its outlook for annual adjusted EPS of USD 5.00-5.15. Verizon said it targets service and other revenue growth of at least 2 percent over the full year, including wireless service revenue growth of at least 3 percent. Capex is planned at USD 17.5-18.5 billion, plus another USD 2-3 billion for the C-band deployment.
Cash flow and debt both higher
Verizon generated USD 9.7 billion in operating cash flow in the quarter, an increase of USD 900 million from the year-earlier period, thanks in part to lower interest expenses. The operator spent USD 4.5 billion on capital expenditure, leaving it with free cash flow of USD 5.2 billion, up from USD 3.6 billion in Q1 2020.
In addition, the company paid USD 45 billion to the FCC for the spectrum won in the recent C-Band auction. To finance this, the company raised USD 12 billion in debt in Q4 2020 and more than USD 31 billion in March 2021. As a result, Verizon's net debt was up by nearly USD 40 billion in the past year to USD 137.4 billion at the end of March. That's equal to 2.9x adjusted annual EBITDA, and Verizon aims to take this to 2.8x by year-end.
Consumer growth in handsets, broadband
In the Consumer market, Verizon reported revenues up 4.7 percent to USD 22.8 billion, and adjusted EBITDA rose to USD 10.4 billion from USD 10.1 billion a year ago. Growth was led by mobile equipment sales, up 24.1 percent to USD 4.2 billion, while wireless service revenue grew 1.5 percent to USD 13.7 billion.
Mobile service revenue was supported by the shift to unlimited and premium plans. On a quarterly basis, the operator lost a net 326,000 postpaid mobile subscribers in Q1, including 225,000 phones and 171,000 tablet subscriptions. Total retail postpaid churn was 0.97 percent, and retail postpaid phone churn was 0.77 percent.
Consumer Fios Internet net additions improved to 98,000 from 59,000 in the same period of 2020, while Fios Video continued to lose customers, with a drop of 82,000 consumer subscriptions in Q1. Verizon said the broadband subscriber growth, combined with an upward shift in speed tiers, more than offsets pressure from the shift to OTT video services and should continue to drive solid revenue performance.
Business revenue up 1.3%
Verizon Business revenues increased 1.3 percent year-on-year to USD 7.8 billion, the highest rate of growth since the company's new operating structure was introduced in 2019. Verizon said strong wireless service growth offset secular pressure in wireline. Adjusted EBITDA was still down slightly, to USD 1.9 billion from USD 2.0 billion a year ago
Business reported 156,000 retail postpaid net additions in Q1, including 47,000 phone net additions and 79,000 tablets. The customer growth helped business mobile service revenues rise 6.2 percent to USD 3.1 billion.
At Verizon Media, revenue rose 10.4 percent year-on-year to USD 1.9 billion. This was the second consecutive quarter of double-digit growth, driven by by strong advertising growth of 26 percent year over year, and revenue from owned and operated platforms up 13 percent.
