Verizon’s fiber-based business revenue is expanding, but legacy declines remain a challenge

business growth
Overall, Verizon’s second-quarter total wireline revenue grew 1.2%, including the recently acquired XO operations. On an organic basis, wireline segment revenue decreased 2.8% compared to a decline of 3.2% last quarter.

Verizon may have seen some revenue struggles in its wireline business segment during the second quarter, but the service provider is confident that its ongoing fiber investments will turn the tide.

Matt Ellis, CFO of Verizon, told investors during its second-quarter earnings call that fiber-based business products are on the upswing.

Verizon CFO Image: Verizon
Matt Ellis

“The shift in the wireline revenue trend towards fiber is growing,” Ellis said during the earnings call, according to a Seeking Alpha transcript. “Organically, fiber based products grew more than 3%, which supports our plans to further invest in fiber.”

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But it appears that Verizon has a set a tough near-term bar that it will have to overcome as it saw revenue pressures in the second quarter.

Ellis said that business adoption of Fios in markets where the service is available is helping drive up business growth, but legacy declines in TDM-based T-1 and voice services remain a drag.

“Within business markets, fiber revenue is expanding, driven by Fios broadband demand, offset by continued pressure in legacy products,” Ellis said.

Verizon’s second-quarter Enterprise Solutions revenue fell 4.1% on an organic basis, a factor Ellis said was “due to persistent trends in our legacy products and pricing compression in the marketplace.”

Likewise, Verizon reported that its wholesale Partner Solutions division saw revenue decline 6.8%. However, Verizon noted that the wholesale revenue mix towards fiber has been trending higher.

Besides not meeting wireline revenue forecasts, Jefferies and other financial analysts attribute the decline in business service revenues to the sale of the telco’s data centers to Equinix.

“Wireline revenue and EBITDA were below expectations, though the sale of the data center business clouded results,” Jefferies wrote in a research note.

Overall, Verizon’s second-quarter total wireline revenue grew 1.2%, including the recently acquired XO operations. On an organic basis, wireline segment revenue decreased 2.8% compared to a decline of 3.2% last quarter.