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Why Verizon’s Wireless Service Revenues Declined in 1Q18

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Verizon’s wireless service revenues in 1Q18

Let’s take a look at the two most important components of Verizon’s (VZ) wireless revenues. The smaller portion comprises the company’s wireless equipment revenues, and the larger portion comprises its wireless service revenues.

In 1Q18, Verizon reported wireless service revenues of $15.4 billion, an ~2.4% reduction YoY (year-over-year). Excluding the impact of the adoption of its revenue recognition standard, Verizon reported flat YoY wireless service revenues of $15.8 billion in 1Q18.

About 81.0% of postpaid phone customers were on unsubsidized pricing plans at the end of 1Q18, compared with 72.0% in 1Q17. The increase in the penetration of unsubsidized plans helped Verizon return to service revenue growth. 

Verizon’s management noted that the company is on track for its wireless service revenues’ YoY growth to turn positive on a reported basis in late 2018.

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Strong retention rate

In 1Q18, Verizon added 260,000 net retail postpaid connections, which includes net phone losses of 24,000 and tablet losses of 75,000. These connections were offset by 359,000 other connected devices gains. Its postpaid smartphone net additions in 1Q18 totaled 220,000.

In 4Q17, Verizon gained 431,000 postpaid phone net customers. Competitors T-Mobile (TMUS) and Sprint (S) reported postpaid phone net additions of 891,000 and 184,000, respectively, in 4Q17. AT&T (T) gained 329,000 postpaid phone net customers in 4Q17.

Verizon’s total retail postpaid churn rate improved to ~1.0% in 1Q18, driven by a consistently low retail postpaid phone churn rate. The company has produced a retail postpaid phone churn of 0.80% or better over the last four quarters. Its 1Q18 churn rate was 0.80%. Verizon’s management attributed this trend to strong customer loyalty.

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