According to Light Reading, Verizon agreed last year to spend more than $50 billion on 5G if it were a C-band spectrum license. It then engaged in a remarkable battle with the U.S. aviation industry to formally commercialize the spectrum earlier this year.
In the first quarter of 2022, Verizon launched a C-band 5G network that covers 130 million people, almost half of the U.S. population. By the end of the quarter, about 40 percent of Verizon's customers had 5G end devices with access to the network and nearly a third of the data traffic in the Availability Zone.
The performance of this network is incredible. According to test results from network monitoring company Okla, Verizon's 5G download speeds have nearly doubled overnight due to the launch of C-band networks.
But such efforts are costly. Verizon's Quarterly Capital noted (CAPEX) spiked in the first quarter as the company spent $1.5 billion on equipment needed for C-band networks during that time. That figure also doesn't include additional money from Verizon's massive marketing campaign to promote the new network during the quarter, which includes a $1,000 mobile phone subsidy and a $1,000 converter credit.
What is worth showing off about Verizon's IF 5G investments? So far, not much.
Churn customers
Light Reading reported that verizon lost 36,000 postpaid mobile phone users in the first quarter. While that's certainly an improvement over its quarterly results a year ago and better than some financial analysts expected, it stands in stark contrast to the 691,000 new postpaid mobile phone subscribers AT&T gained during that period. For its part, AT&T has slightly postponed the construction of its own large-scale medium-frequency 5G network until next year.
In addition, Verizon executives acknowledged that the company saw the number of new customers signing up for Verizon's services slow down from February and accelerate in March, when the carrier's C-band marketing campaign was intensifying.
David Barden, a financial analyst at Bank of America Merrill Lynch, pointed to the situation on Friday's Verizon quarterly conference call.
"There was a time when Verizon had the best network and could charge the highest price. On these conference calls, we discuss profit margins and available market share. "You're donors to [the market] share right now." We're celebrating how many 5G phones we have and how many C-bands are being deployed, but there's no clear indication that that this translates into something tangible in terms of economic returns that investors can celebrate. So can we talk about this? ”
Verizon's management team, including CEO Hans Vestberg, believes that "over time, our focus is on growing this business."
"We're going to compete well." WeiHans said, adding, "There is more excitement [in the markets where we offer C-band services].
However, he also acknowledged that Verizon's labor and energy costs could be affected by inflationary pressures. Like AT&T CEO John Stankey, he said Verizon might consider raising the price of the service.
In addition, Verizon warned that it now expects its full-year 2022 financial results to be at the low end of previously announced guidance, with the company's shares down 5% in response.
Still, "we still have the ability to meet our long-term growth goals," Weehans said.
Analysts are bearish
Some financial analysts are less certain.
"Neither Verizon's user size nor ARPU has grown. With rising inflationary pressures, pricing power is nowhere to be found. Moffett Nathanson's financial analysts wrote in a note to investors after Verizon's first-quarter results were released, "On the business side, Verizon has lost share. Unless the still rather invisible 5G revenue (IoT, MEC, or private networks) changes, Verizon's growth runway will appear very weak. ”
Others have given similar views.
"We do remain concerned about Verizon's long-term outlook in the wireless space, as T-Mobile leads Verizon in deploying MIDS and also leads significantly in terms of total holdings of THE MID spectrum." In his assessment of Verizon's quarterly results, Financial Analysts at New Street Research wrote, "Verizon's desire to achieve strong service revenue growth through ARPU and subscriber growth seems overly optimistic in the face of increasing competition from challengers (T-Mobile) with similar networks but at a significantly discounted price." ”
Analysts at New Street Research also acknowledged that the overall growth of the U.S. wireless industry is widely expected to slow sometime this year, and Verizon may be the first 5G operator to be affected by this trend, which could eventually affect all market participants.
In any case, light reading reported that people's pessimism is mainly concentrated in the future, as analysts added, Verizon's first-quarter results are "not so much pessimistic." T-Mobile is scheduled to announce its first-quarter results next week. (C114 Jiang Junmu)