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Why Verizon Expects Decline in Wireless Segment EBITDA Margin

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Verizon’s wireless segment EBITDA margin

Verizon Communications’ (VZ) wireless component reported $10.0 billion in EBITDA (earnings before interest, tax, depreciation, and amortization) for 3Q17, which represents a 0.4% rise on a YoY (year-over-year) basis. Verizon’s wireless segment EBITDA margin was 46.2% in 3Q17, up from 44.9% one year ago.

This improvement in VZ’s wireless segment EBITDA margin was driven by cost-saving initiatives, better-than-expected wireless service revenues, and better customer growth.

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During the UBS Global Media and Communications Conference on December 5, 2017, Matthew Ellis, Verizon’s CFO (chief financial officer), spoke about Verizon’s wireless segment EBITDA margin. Ellis noted that Verizon expects a seasonal step-down in its total wireless segment EBITDA margin in 4Q17, compared with the rest of the year.

However, Ellis doesn’t expect the drop to be as significant as it was in prior years, given lower handset promotions.

Subscriber growth

T-Mobile (TMUS) has been an aggressive share taker on an ongoing basis. In calendar 3Q17, Sprint (S) and T-Mobile reported 279,000 and 595,000 postpaid phone net additions, respectively. Meanwhile, Verizon gained 274,000 postpaid phone net customers, and AT&T (T) lost 97,000 postpaid phone subscribers.

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