Feature Article

October 21, 2014

Verizon Q3: Mobile, Consumer Revenue Grows While Enterprise, Wholesale Decline

Verizon Communications reported 89 cents in earnings per share for the third quarter of 2014, compared with 78 cents per share (or 77 cents on a non-GAAP adjusted basis) in the same quarter of 2013. Whether one is happy with those results depends, as always, on expectations.

Some had estimated Verizon would do even better than it did. But Verizon did post significant revenue growth.

Total operating revenues in the third quarter of 2014 were $31.6 billion, a 4.3 percent increase compared with third quarter 2013, Verizon reports.

Excluding third quarter 2013 revenues of the public sector business Verizon divested at the beginning of third quarter 2014, the comparable growth rate (non-GAAP) would have been 4.9 percent, Verizon says.

One notable observation is the huge disparity between operating income margin between the mobile and fixed network segments, though.

In the third quarter of 2014, mobile segment operating income margin was 31.9 percent and segment earnings (EBITDA) margin on service revenues was 49.5 percent.

In the third quarter of 2013, mobile segment operating income margin was 33.8 percent and earnings (EBITDA) 51.1 percent.

Some might see the dip as an impact of the U.S. mobile marketing wars, as well as the shift by consumers to non-subsidized device plans, which have the impact of lowering service revenues, even if device sales revenue can rise, in the short term.

Compare that performance with results from the fixed network segment. Total revenues were $9.6 billion in third quarter 2014, down 0.8 percent year over year. So the first comparison is that fixed network revenue declined, while mobile segment revenue grew.

Fixed network operating income margin was 2.3 percent in the third quarter of 2014, up from 1.5 percent in third quarter 2013. So, mobile operating income margin was an order of magnitude higher than fixed network operating income margin.

In other words, the mobile business is 10 times more profitable than the fixed network business, on an operating income margin basis.  

Fixed network segment earnings (EBITDA, non-GAAP) was 23 percent in third quarter 2014, flat compared with third quarter 2013. While fixed network EBITDA was lower than in the mobile segment, earnings margin was not so dissimilar.

Still, consumer revenues were $3.9 billion, up 4.5 percent compared with third quarter 2013, with FiOS revenues representing 76 percent of the total.

Consumer ARPU for wireline services increased to $125.32 per month in third quarter 2014, up 10.3 percent compared with third-quarter 2013.

Total FiOS revenues grew 13.4 percent, to $3.2 billion, comparing third quarter 2014 with third quarter 2013.

It is possible to attribute the slight decline in fixed network segment revenues to the business customer segment.

Sales of strategic services to enterprise customers increased one percent, to $2.1 billion, compared with third quarter 2013.

Strategic services include private IP, Ethernet, data center, cloud, security and managed services.

Still, overall sales in the enterprise and wholesale weakened, year over year. 




Edited by Alisen Downey


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