The U.S. market is flooded with operators touting their fiber plans and gains, but Verizon wasn’t among them. While executives briefly mentioned the addition of 60,000 Fios customers in Q1 2022, fixed wireless access (FWA) proved to be the star of its earnings call.
Verizon’s Fios gains were comprised of 55,000 consumer net additions and 5,000 in the business segment. However, these were partially offset by non-Fios wireline losses, leaving it with a total of 35,000 wireline broadband additions in the quarter.
But the company also counts FWA in its broadband metrics. Verizon scooped up 194,000 fixed wireless customers in the quarter, leaving it with total broadband net additions of 229,000. CFO Matt Ellis said on the call this figure was the “highest net adds in over a decade.”
CEO Hans Vestberg reiterated the operator expects to open 550,000 new Fios locations for sale this year and said it will look for opportunities to grow that number. He noted, though, that the focus there is expansion within its existing ILEC footprint. It’s looking to FWA as its primary broadband offering in all areas outside of that.
“The usage on the fixed wireless access is very similar to our Fios users, so this is a primary usage [connection] in the vast majority of cases,” he said. “This is a high-quality product that definitely is going to compete very well in the market. And in our case, as I said before, this means we are nationwide with broadband as we are expanding our C-band and can address more and more households.”
In a note to investors, MoffettNathanson analysts dubbed Verizon’s wireline business “the forgotten stepchild” of the company, but warned “it is much too large to simply ignore" given it still accounts for 23% of service revenues. While the consumer wireline business “isn’t doing too badly” despite weak net additions, the business wireline segment “is doing very poorly indeed” with its fourth consecutive quarter of accelerating declines, they wrote.
“The problems with the Business Wireline segment are secular rather than cyclical; while pressured by the company’s decision to exit the international wholesale voice segment, which will eventually be lapped, we do not anticipate broader improvements,” MoffettNathanson concluded.
Inflation
Like AT&T CEO John Stankey earlier in the week, Vestberg and Ellis flagged the potential impact of inflation on the company. Ellis indicated energy and labor costs are its primary areas of exposure. While these have not yet had a significant impact on its financials, he noted they represent “a meaningful portion of our direct cost structure and have the potential to drive additional expense pressures” throughout the rest of the year. Echoing Stankey, Vestberg warned persistent inflation could force it to raise prices.
“We are planning for all scenarios, we have plans to be prepared for what it takes. That will of course include different types of cost adjustments but also looking into what we can do with pricing,” he stated. “We don’t know how this will impact us but clearly these levels of inflation we have never seen before.”
Financials
Consolidated revenue of $33.6 billion was up 2.1% year on year, with total Fios revenue rising 2.2% to $3.2 billion. Net income, however, fell 12.4% to $4.7 billion.