Verizon and AT&T report strong Q2
Verizon and AT&T have reported growth across key business units in their Q2 financial results.
Both recorded record low post-paid churn and strong growth in mobile and media, as well as other areas.
Verizon: CFO praises "exceptional results"
For Verizon it was 5G leading growth and earnings per share (EPS) for the full year 2021 are now revised upward to the range of $5.25 to $5.35, compared to $5.00 to $5.15 in previous guidance.
Consolidated operating revenue was $33.8 billion – a result of "strong sequential wireless revenue growth", Verizon said – and net income was $5.9 billion, while adjusted EBITDA* was $12.2 billion.
Verizon chairman and CEO Hans Vestberg said: "We are executing on our multipurpose network strategy and producing positive results in each of our five growth vectors, recording strong second quarter results.
"With more connections on our network than anyone else, our already excellent network performance improved in the quarter and was recognised by RootMetrics as the best overall network performance for the 16th time in a row. We are also expanding our 5G Ultra Wideband and 5G Home markets," he continued, adding that Verizon is on track to close both the proposed $6.9 billion Tracfone acquisition and Verizon Media transaction this year.
On Verizon Media, Verizon said it no longer depreciated or amortised these assets, which resulted in a partial benefit of 3 cents per share in Q2, a benefit that will continue until that deal closes in Q3.
However, on the Tracfone deal, it was also reported this week that five US senators have competition concerns about what it will mean for end-user pricing.
Total wireless service revenue at Verizon stood at $16.9 billion, a 5.9% increase year over year, and a 4% increase from Q2, 2019. Over the quarter Verizon counted 528,000 retail post-paid net additions, including 275,000 phone net additions, resulting in 121.3 million total retail connections.
Total Verizon Consumer revenues were $23.5 billion, an increase of 11.2% year over year, and an increase of 6.7% from second-quarter 2019. This increase was primarily driven by wireless equipment revenues of $4.7 billion, which rebounded above pre-pandemic levels.
Despite "minimum contributions" from international roaming, Consumer wireless service revenues were $13.8 billion in Q2, a 5.4% increase year over year, and a 2.5% increase from Q2, 2019.
Another highlight for the consumer business was the growth in 5G-capable devices, which are now in the hands of around 20% of the wireless customer base.
Balancing this against costs, capital expenditures were "in the range of $17.5 billion to $18.5 billion", including the further expansion of 5G mmWave in new and existing markets, the densification of the 4G LTE wireless network to manage future traffic demands, and the continued deployment of the company's fibre infrastructure.
Expenditures related to the deployment of Verizon's C-Band 5G network are not included in these figures. Verizon did previously announced an incremental $10 billion of capital expenditures from 2021 to 2023, of which $2 billion to $3 billion is expected in 2021.
Discounting the impact of Covid in Q2 and Q3 last year, retail post-paid phone churn set a new record low of 0.65% and total retail post-paid churn of 0.83%.
Fios internet saw 92,000 net consumer additions. The company's trailing 12-month total Fios Internet net addition performance was the highest since 2015.
In the business segment, total revenue ended on $7.8 billion, an increase of 3.7% year over year, but relatively flat compared to Q2 2019.
In this segment, total retail post-paid churn was 1.3%, and retail post-paid phone churn 1.07%. Over the quarter there were 178,000 retail post-paid net additions, including 78,000 phone net additions.
Verizon CFO Matt Ellis said: “Second quarter results were exceptional, both financially and operationally.
“Our strong first half performance and the momentum in our business gives us the confidence to raise our total wireless service revenue growth guidance to between 3.5% and 4%, an update from prior guidance for 2021 total wireless service revenue growth of at least 3 percent."
AT&T: Customer growth in wireless, fibre and HBO Max
AT&T saw growth of 7.6% in consolidated revenues, totalling $44 billion and cash from operations reached $10.9 billion. However, these figures were impacted by the divestment of business in Puerto Rico and the U.S. Virgin Islands.
Capital expenditures reached $4 billion; gross capital investment was $5.3 billion and cash content spend also $5.3 billion. FirstNet reimbursements are expected to be "about $1 billion for full year 2021". Free cash flow stood at $7 billion with total dividend payout ratio of 55%.
“We’re pleased with our performance and our momentum is strong,” said John Stankey, AT&T CEO.
“For the fourth consecutive quarter, we saw good subscriber growth across wireless, fibre and HBO Max. Mobility delivered strong service revenue, EBITDA and post-paid phone growth. Our fibre business, which leads on customer satisfaction, grew subscribers and penetration. HBO Max had another strong quarter and is ahead of plan to be a leading direct-to-consumer streaming platform, with both subscriber- and ad-supported choices. As a result, we’re raising our global HBO Max year-end forecast to 70 million to 73 million subscribers. Also, we’re updating full-year guidance for consolidated revenue, wireless service revenue, adjusted EPS and free cash flow.”
Like Verizon, AT&T also saw a record low in post-paid churn, which stood at 0.69%. There were 789,000 post-paid phone net adds; 1,156,000 post-paid net adds; and 174,000 prepaid phone net adds.
In this segment, revenues increased by 10.4%; service revenues by 5%; and equipment revenues by 31.9%. Operating income increased 3.4% on last year to reach $6 billion.
In consumer wireline, revenues were up 2.9%, while broadband revenues increased 8.3% and ARPU growth reached 6.1%.
By Q2-end 2021, there were 47 million domestic HBO Max and HBO subscribers, up from 44.2 million at the end of the first quarter of 2021. Domestic HBO Max and HBO subscribers increased 10.7 million year over year, driven by HBO Max retail subscriber growth. Domestic subscriber ARPU was $11.90.
HBO Max launched in the US in May 2020, Latin America in late June and could be operational in Europe in 2022.
Also in the news this week, AT&T is selling Vrio Corp to Grupo Werthein for an undisclosed sum.
The entertainment services company counts 10.3 million subscribers across 11 countries in Latin America and the Caribbean, via DIRECTV Latin America, SKY Brasil and DIRECTV GO.
Its infrastructure includes satellites and broadcast centres that carry 4K video formats. Vrio’s broadband operations, along with other investments, including Torneos y Competencias in Argentina and WIN Sports in Colombia, will transfer to Grupo Werthein at close, which is expected in early 2022.
AT&T will provide certain services, such as billing, infrastructure and software support, to Grupo Werthein for one to three years after the transaction closes
On the tech side, AT&T is also working with JBG Smith to create the first 5G Smart City at scale in National Landing, which is home to Amazon’s second headquarters and Virginia Tech’s Innovation Campus.
Promising to deliver "one of the most robust network infrastructure deployments in any urban environment", deployments are planned for the first half of 2022 and will expand with development of the community.
There are expectations that National Landing will become a prototype for smart cities of the future and create "a unified consumer experience across asset types".