Verizon’s wireless earnings margin in 1Q17
In the previous part, we discussed Verizon’s (VZ) consolidated EBITDA (earnings before interest, tax, depreciation, and amortization) margin over the last few quarters. In this part, we’ll take a look at Verizon’s wireless EBITDA margin. Verizon’s wireless segment generated adjusted EBITDA of $9.4 billion in 1Q17, a 7.5% reduction YoY (year-over-year). Additionally, the wireless segment’s adjusted EBITDA margin was 45.1% in 1Q17, down from 46.2% a year prior.
This EBITDA margin contraction was due to heavy wireless promotional activity during the quarter associated with the company’s unlimited plan, and elevated competition in the industry in 1Q17. It was also hurt by service revenue trends.
Verizon’s wireless margin impacted in 1Q17
Although Verizon has attempted to maintain its pricing, it needs to respond aggressively to Sprint’s (S), T-Mobile’s (TMUS), and AT&T’s (T) unlimited offers and free iPhone promotions following Apple’s (AAPL) iPhone 7 launch.
T-Mobile continues to be an aggressive share taker. T-Mobile’s latest “Uncarrier” move embeds taxes and fees into the base price for data plans, effectively lowering prices. In calendar 1Q17, T-Mobile and Sprint reported 798,000 and 42,000 postpaid phone net additions, respectively. However, AT&T and Verizon lost 348,000 and 289,000 postpaid phone subscribers. Continue to the next part for a discussion on Verizon’s wireline EBITDA margin.