uploads///Telecom Verizon Q EBITDA

Are Verizon’s Cost-Cutting Initiatives Reaping Rewards?

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Oct. 19 2018, Updated 9:01 a.m. ET

Verizon’s focus on cost cutting

Verizon (VZ), the largest wireless service provider in the United States, is undertaking various cost-cutting efforts. Recently, the telecommunications company rolled out an initiative that seeks to encourage thousands of its employees to take early retirement. This initiative is part of the company’s plan to cut $10 billion in total costs by 2021.

Verizon reported that its zero-based budgeting had realized $0.5 billion in cumulative cash savings in the first half of 2018. The company’s ongoing cost-cutting initiatives have been reflected in its improving profitability. Verizon should be able to realize more savings to reinvest in growth, such as improving its network or distributing dividends to its shareholders.

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Verizon reported consolidated adjusted EBITDA of $11.9 billion in the second quarter compared to $11.1 billion in the same period of the previous year as the company focused on driving profitability via cost and capital efficiencies across its operations. The company’s adjusted EBITDA margin expanded to 36.8% in the second quarter from 36.5% in the previous year’s quarter.

Peer comparison

In comparison, peers Sprint (S) and T-Mobile (TMUS) reported consolidated adjusted EBITDA margins of 57.1% and 41%, respectively, in the quarter that ended on June 30. AT&T’s (T) combined domestic wireless operations EBITDA margin was 44.1% in the quarter.

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