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Offloading HuffPost hits Verizon’s Q4 earnings

Verizon highlighted mobile revenue growth and a good media performance in its Q4 2020 results, but also revealed a sizeable dent in earnings from the sale of HuffPost.

‘Disposal’ is probably a better word, since the US telco passed ownership of the news outlet to Buzzfeed late last year for an all-stock deal worth an unspecified sum as well as handing over an investment…also of an unspecified amount. Not only did Verizon have to shell out to get rid of HuffPost, it is also now feeling the effects in its quarterly report.

Verizon’s net income was down by 9.6% year-on-year to US$4.72 billion in the three months to the end of December, while earnings-per-share fell to $1.11 from $1.23. The telco said Q4 EPS included a pretax loss from special items of $523 million, those special items being redundancy pay and the like for HuffPost employees and a $119 million net loss primarily related to the disposal of that business. Excluding those special items its EPS came in at $1.21, up from $1.13 in the year-ago quarter.

“Verizon finished the fourth quarter with strong financial performance,” said a predictably bullish Hans Vestberg, the operator’s chief executive. “2020 was marked by transformational change, including the launch of our 5G nationwide network. We witnessed a mass shift toward virtual collaboration, touchless retail and delivery, remote work, distance learning, and telemedicine,” Vestberg said, before going on to talk up Verizon’s network performance, its relationship with global brands, and future growth opportunities, amongst other things.

He did not mention the fact that Verizon’s group turnover witnessed a small decline to $34.69 billion on the back of a 5.1% fall in wireless equipment revenues, nor that the fixed-line business continued to slide, somewhat offsetting growth in mobile service revenue and a solid performance for Verizon Media.

For the full year, group revenues were down 2.7% to $128.29 billion, while the bottom line landed at $18.35 billion, down by $1.4 billion.

From a cash flow point of view the operator’s numbers look pretty healthy though. Full-year 2020 operating cash flow of $41.8 billion, represented a 16.8% on 2019, while free cash flow was up 32.4% to $23.6 billion.

Capex was up slightly to $18.2 billion in 2020 from $17.9 billion as the company spent on both 4G and 5G networks.

Given the nature of the business, capital spending is not going to decrease any time soon. Furthermore, Verizon is one of the companies expected to face a sizeable bill from auction 107, through which the state has thus far raised close to $81 billion by selling C-band spectrum.

On Tuesday the FCC’s acting chairperson Jessica Rosenworcel announced that the next phase of the sale – the assignment phase, in which the winning bidders are allocated their actual spectrum positions – will begin on 8 February. While phase two is unlikely to make a significant difference to the final total, this eye-wateringly expensive contest isn’t over yet.

But telcos with 94.4 million retail mobile customers, as Verizon reported having at the end of Q4, cannot afford to get left behind in the 5G race. Earlier this month T-Mobile US released preliminary operational statistics for 2020, claiming a customer base of 102.1 million at year-end, buoyed by the Sprint acquisition.

T-Mobile was keen to shout about its 1.6 million postpaid net customer additions in Q4 and 5.5 million in 2020 as a whole, and it’s easy to see why when you look at Verizon’s operational figures. The telco added a net 357,000 retail postpaid connections in the fourth quarter and just 40,000 over the full year.

Its wireless retail postpaid phones net adds were stronger at 163,000 and 95,000 in the quarter and year respectively, but both were significantly down on the same periods in 2019 and pale into insignificance compared with T-Mobile’s 824,000 and 2.2 million.

Verizon may have turned in a solid, if underwhelming, performance last quarter, but it will face some strong competition in the coming year.


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