Verizon’s fiber-centric focus isn’t enough to overcome enterprise revenue declines

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Despite the declines, Verizon is seeing fiber-based services becoming a larger portion of wireline business services growth.

Verizon has set a focus on providing fiber-based services to consumers and business customers, but in the near term the service provider’s wireline business continues to see revenue pressure.

Evidence of this trend was certainly seen in Verizon’s third-quarter Enterprise Solutions, in which revenue dipped 5% to $2.2 billion. Likewise, Business Market revenues declined 5.8% to $933 million.

Matt Ellis, CFO of Verizon, noted that despite the declines Verizon is seeing fiber-based services becoming a larger portion of wireline business services growth.  

RELATED: Verizon’s Ellis: Fiber is a key growth component for our wireline business

Verizon CFO Image: Verizon
Matt Ellis

“Within business markets, fiber revenue is increasing, driven by demand for Fios broadband products,” Ellis said.

Verizon continued to see pain in its wholesale Partner Solutions segment, in which revenue declined 3.9% on an organic basis. The telco noted that results were an improvement over the earlier period.

Verizon’s third-quarter wireline revenue grew 1.1% including XO operations and data center divestitures. However, on an organic basis, wireline segment revenue decreased 2.7%, which was consistent with the prior quarter.

“Our fiber offerings continue to gain share and grow revenue partially offset in a decline in legacy copper products,” Ellis said.

These results did little to wow financial analysts.

Scotiabank Wireline said in a research note that Verizon’s wireline revenue came in lower than it expected due to continued losses in Enterprise.

“Revenue came in at $7.7B vs. our estimate of $7.8B, which we believe is largely due to Enterprise revenue declines of ~5%,” Scotiabank said in a research note.

The research firm added that Verizon is facing ongoing pricing demands from its large enterprise customers.

“As enterprise customers renew contracts, they are putting greater pressure on VZ to offer more attractive rates, which is causing a steady decline in the segment,” Scotiabank said. “We believe that this will continue for both F18 and F19 and, as a result, have lowered our revenue estimates for the wireline business.”

Jefferies agreed that “pressures in enterprise, SMB, and wholesale more than offset broadband growth.”