Verizon Q1: Wireline revenue impacted by wholesale losses; gains in FiOS, enterprise services
Verizon's (NYSE: VZ) wireline story in Q1 2012 was again a tale in which the carrier saw gains from next-gen consumer services like FiOS data and TV and business services like cloud and Ethernet, but declines in wholesale revenue clouded the picture.
View selected slides from Verizon's Q1 2012 investor presentation.
Driven by strong ARPU from FiOS services, the telco's consumer revenues rose 1.7 percent to $3.4 billion. Consumer ARPU rose 8.1 percent from Q1 2011 to $97.88 during Q1 2012.
Enterprise revenues were also up, rising 0.9 percent to $3.9 billion, a result of its acquisition of cloud and data center provider Terremark.
However, an 8.9 percent decline in wholesale revenue drove down the telco's overall wireline revenue 2 percent to $9.9 billion, while the EBITDA margin dropped to 22.6 percent from 23.6 in 2011.
Earnings per share climbed 16 percent in the first quarter to 59 cents, a result that helped Verizon's shares climb 1.3 percent on Thursday after the earnings announcement. Shares closed at $38.15 and continued to rise Friday to $38.80 by midday.
Here's a breakdown of the company's key wireline metrics:
- Landline losses: As expected, Verizon continued to see ongoing losses of its POTS voice subscriptions. During the quarter the telco lost 437,000 voice line subscribers, ending the quarter with in the 23.7 million total subscribers.
- Broadband and video: Amidst DSL subscription declines, FiOS broadband data and FiOS TV continue to be Verizon's shining stars in the consumer segment. It added a total of 104,000 broadband subscribers, reaching almost 8.8 million in the quarter. Meanwhile, the telco added 108,000 new FiOS TV customers, ending the quarter with a total of 4.35 million subscribers. FiOS represented 63 percent of Verizon's consumer wireline revenues in Q1 2012.
- Business and wholesale services: Global enterprise revenues rose 0.9 percent over Q1 2011 to $3.9 billion. The key contributors to Verizon's business services growth were strong sales of strategic services, including Terremark cloud services, security and IT solutions, and strategic networking services. Strategic revenues increased 11.6 percent during the quarter and represented 51 percent of its global enterprise revenues. Wholesale revenues, however, declined 8.9 percent to $1.86 billion.
Despite the wholesale service losses, Verizon said in its earnings statement that it "still expects to improve wireline margins for the full year, helped by a repositioning of its enterprise offers."
From an overall revenue standpoint, Verizon's Q1 2012 earnings rose 15.7 percent to 0.59 per share, supported by solid growth due to strong gains in its wireless division.
Likewise, company revenues also rose 4.6 percent to $28.2 billion, and operating profit improved to $5.2 billion from USD 4.5 billion a year earlier.
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