Assessing Verizon’s Progress on Its Cost-Cutting Initiatives

Cost savings: A key operating priority

In the first quarter, Verizon (VZ) reported adjusted EBITDA of $11.8 billion, up from $10.8 billion in the first quarter of 2017. During the year, the telecom company has concentrated on driving profitability via cost and capital efficiencies across its business. Supported by higher wireless margins, Verizon’s adjusted EBITDA margin increased from ~36.5% in the first quarter of 2017 to ~37.1% in the first quarter.

During the JPMorgan Global Technology, Media, and Communications Conference held on May 16, Matt Ellis, Verizon’s executive vice president and CFO, spoke about the company’s cost-cutting initiatives. Ellis stated that the company had outlined a goal of generating $10.0 billion in cumulative cash savings in the next four years.

He noted that the company’s zero-based budgeting realized about $200.0 million of savings so far through work streamlining, process improvements, and automation. The process appears to be on track over the four-year period.

Assessing Verizon’s Progress on Its Cost-Cutting Initiatives

Peer comparisons of EBITDA margin

Sprint (S) and T-Mobile (TMUS) reported consolidated adjusted EBITDA margins of ~47.2% and ~38.0%, respectively, in the first quarter. AT&T’s (T) combined domestic wireless operations EBITDA margin was ~41.8% during the same period. Sprint is enjoying higher margins compared to its rivals due to significant cost reductions.

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