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Half year earnings backup Verizon’s move into mobile media

Verizon

Verizon has released its half year earnings reporting a larger than expected decline, as the business continues its efforts to diversify its proposition.

The news comes one day after the telco giant confirmed it would be acquiring Yahoo’s core internet business in a $4.8 billion, a move which has generally been accepted as an effort to ensure Verizon is not too reliant on its phone business. Total revenues for the Verizon Wireless business were $21.7 billion in second-quarter 2016, a decline of 4% year-on-year, as the company stated more customers continued to choose unsubsidized device payment plans.

At the end of Q2, Verizon Wireless had a total of roughly 31.8 million device payment plan phone connections, representing about 37% of the postpaid phone base. These are promising numbers, however during the quarter net phone additions increased 86,000, which when compared to Sprint, who added 173,000 connections during the same period, demonstrates the tough competition which is taking place in the US postpaid contract, and the drive to seek out new revenue streams.

“Just over a year ago we acquired AOL to enhance our strategy of providing a cross-screen connection for consumers, creators and advertisers,” said Lowell McAdam, Verizon CEO, following the Yahoo announcement. “The acquisition of Yahoo will put Verizon in a highly competitive position as a top global mobile media company, and help accelerate our revenue stream in digital advertising.”

Is the Yahoo deal a smart move for Verizon?

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Verizon acquired AOL last year for roughly $4.4 billion, which brought several media brands into the business. Since that point the team has continued to invest in premium media brands including The Huffington Post, TechCrunch, Engadget and Makers. The additional of Yahoo’s media brands will now create a portfolio of roughly 25 titles, as well as bringing in one of the world’s more traditional email brands, with approximately 225 million monthly active users.

While Verizon is one of the most recognizable brands in the US, the quarterly earnings demonstrate the need for diversification. Although this has been an ongoing trend within the telco industry, the confirmation of yesterday’s deal endorses the idea telcos are no longer able to rely on a single business unit to build an effective business model.

“By acquiring Yahoo, we are scaling up to be a major competitor in mobile media,” said McAdam. “Yahoo is a complementary business to AOL, giving us market-leading content brands and a valuable portfolio of online properties and mobile applications that attract over 1 billion monthly active consumer views. We expect this acquisition to put us in a great position as a top global mobile media company and give us a significant source of revenue growth for the future.”

In first-half 2016, Verizon Wireless added a net of 1.3 million postpaid connections, while stabilizing wireless service revenue declines, maintaining strong customer retention, densifying networks in major markets and advancing 5G deployment. The team also converted its go90 application to the AOL platform, now enabling the team to monetize mobile video offerings. Last month, it was also announced Telogis would be acquired into the business to build the capabilities in the telematics arena.

Across the group, Verizon reported $30.5 billion revenues, a 5.3% decrease compared with second-quarter 2015, though there has been promising progress within new business units. IoT, for example, accounting for $205 million in second-quarter 2016, a year-over-year increase of about 25%.

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