uploads///Telecom Verizon Q Revenue

Understanding Verizon’s Revenue Trend

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Feb. 7 2017, Updated 6:05 p.m. ET

Verizon’s revenue in 4Q16

Verizon Communications’ (VZ) 4Q16 consolidated revenues came in slightly above consensus, but the beat was solely a function of low-margin equipment revenue, while service revenues missed consensus. Verizon generated revenues of $32.3 billion in 4Q16, representing a 5.6% YoY (year-over-year) fall.

The organic revenue fall was driven by the continued migration of subscribers to unsubsidized rate plans, which generate lower revenue. Excluding the divestiture of its wireline assets to Frontier (FTR) in April 2016 and AOL, adjusted organic revenue fell 2.4% YoY.

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About 67% of postpaid phone customers are now on an unsubsidized pricing plan, as compared to 60 percent in 3Q16. As the penetration of unsubsidized plans rises, Verizon should be able to improve its service revenues. Wireless service revenue growth is expected to stay negative in 2017, with a positive growth beginning in 2018.

Verizon generated equipment revenue of $5.7 billion in 4Q16, representing a 6.2% YoY rise. This increase in equipment revenues was driven by a 77% take rate for equipment installment plans as Verizon moves fully to installment plans going forward.

Peer comparisons

Major competitor AT&T (T) saw its total revenues fall ~0.7% YoY to reach $41.8 billion in 4Q16. Sprint’s (S) total revenues rose ~5.5% YoY to reach $8.6 billion in calendar 4Q16. T-Mobile (TMUS) will report its results for 4Q16 on February 8, 2017, and Wall Street expects T-Mobile’s revenue to rise ~19.3% YoY to reach ~$9.8 billion for the quarter.

Continue to the next part for a discussion of Verizon’s consolidated EBITDA (earnings before interest, tax, depreciation, and amortization) margin.

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