Verizon takes $5.8 billion writedown at Business division

The US telco made the announcement via an SEC filing in which it essentially said that its numbers will be lower than it might once have expected, effectively devaluing the operations in question. Verizon Business serves enterprise and government customers.

"In the fourth quarter of 2023, in connection with its annual budget process, Verizon completed a comprehensive five-year strategic planning review of its Business reporting unit resulting in lower financial projections compared to the prior year five-year strategic planning cycle," the company's filing states. "The revised projections were used as a key input into the Business reporting unit's annual goodwill impairment test performed in the fourth quarter of 2023. The impairment test determined that the fair value of the Business reporting unit was less than its carrying value."

Hence the hefty non-cash goodwill impairment charge in Q4, which will leave the unit with a goodwill balance of $1.7 billion as of end-2023.

Fundamentally, the unit has been hit by the broader challenges the telco faces at its wireline operations, as well as, in its own words, "continuing competitive and macroeconomic pressure."

Businesses are doing all they can to reign in their own spending, which naturally has an impact on their telcos providers. And what they do spend has skewed more towards mobile services than fixed.

A number of analysts, as quoted by Fierce Telecom, have also pointed to the shift from MPLS to SD-WAN, the latter bringing in a lower share of revenue to the telco provider than the former. The issue is the revenues the telco is generating from business services, rather than a decline in customer numbers, the news outlet notes.

It's only a part of the story, but Verizon's third-quarter figures show a year-on-year increase in retail postpaid wireless connections of almost 1 million in the Business division. It's wireline broadband connections slipped by 2% over the same period.

However, operating revenues for Business slid by 4% in the same timeframe, coming in at $7.53 billion for the quarter, while EBITDA was down by 6% to $1.67 billion.

One area of growth for Verizon Business is in the fixed wireless access (FWA) segment, an area in which it sharpened its focus over the past couple of years. Its Q3 report shows it had more than a million FWA customers in the Business segment, well over double the figure it posted a year earlier. Of course, FWA is a drop in the ocean in terms of overall segment financials, but it's worth highlighting.

On a broader scale though, Verizon clearly does not see the downward trend in Business changing any time soon. There will be no great surprises when it posts Q4 numbers next week.