Verizon Communications Inc.’s shares inched up after reporting second-quarter revenue that exceeded expectations.
Shares of the U.S. telecom carrier rose 3.6 percent at $46.01 during premarket trading on Thursday. Revenue was up 0.1 percent to $30.5 billion, compared to revenue forecast of a 2 percent decline. The company also reported earnings per share of 96 cents, which is in line with the forecast. Analysts’ estimates were 96 cents on $29.9 billion revenue.
The company also noted a growth in wireless subscribers, as well as the recent acquisition of Yahoo, which cost Verizon $4.5 billion. During the quarter, the company added 614,000 monthly-paying subscribers, including 358,000 phone additions.
Its wireless business saw a subscriber growth of 12 percent to 114.5 million users, compared to 113.2 million users last year’s second quarter and 113.9 million in the first quarter. This is a huge improvement from the first quarter when the company reported its first quarterly loss in terms of customers.
The latest quarter noted gains from data center sales accompanied by lower expenses. Earnings during the year-earlier period were negatively affected by a strike in the wireline business, Reuters reports.
“Verizon reignited its growth engine in the quarter, both adding and retaining wireless customers while scaling our media business and continuing to invest in our superior networks,” Verizon chairman and CEO Lowell McAdam said in a statement. “With record customer loyalty and a clean sweep of third-party network quality results, we’re leading the way to provide customers with next-generation broadband, smart cities, telematics, media and Internet of Things services.”
Revenue from the company’s wireless business dropped 1.9 percent to $21.3 billion, while revenue from the wireline division, which includes its FiOS services, rose 1.2 percent to $7.8 billion.
Verizon has been competing against smaller companies T-Mobile and Sprint Corp., and the market for wireless service in the U.S. is saturated, as most customers are already using mobile phones.
In mid-February, the company reintroduced their unlimited data plan after five years, which was met by aggressive promotions from competing rivals. Sprint, for instance, announced in June that it was offering free unlimited data, text and phone calls for one year to all customers who would bring their own devices in promotions targeting Verizon subscribers, Reuters reports.
The company’s unlimited plan is priced at $80 per month, which is considerably more expensive than competing offers. “Even with the price premium we have, it shows that customers value the high-quality network experience we deliver,” Verizon chief financial officer Matthew Ellis said during the earnings conference call.
Total retail postpaid churn, which is the rate of customer defections for monthly-paying subscribers, was flat at 0.94 percent compared to the same period last year, and below analysts’ estimates of 1.1 percent.
Jonathan Chaplin, analyst at New Street Research, considered the subscriber growth strong. However, he ushers investors to be more careful. “We remain cautious on Verizon equity given what we regard as unsustainable margins and returns in a competitive market,” he said in a Reuters report.
According to the company, its service-revenue trend has flattened as undiscounted users are making up for losses from the customers upgrading to unlimited plans. The company is expecting an improving trend in the second half of the year.
During the quarter, Verizon also introduced its new digital media business unit called Oath. The new segment includes AOL, HuffPost, TechCrunch, and the recently acquired Yahoo. According to the company, Oath is now serving about 1 billion unique monthly users worldwide, which represents about $7 billion in yearly revenues. For this segment, revenue from AOL was consistent with results in last year’s second quarter.
“Oath expects to realize more than $1 billion in cumulative operating expense synergies through 2020,” the company said in the report.
Verizon is also hoping to build momentum with its Internet of Things (IoT) and telematics business. Total revenues for telematics were approximately $220 million during the quarter. Overall, IoT revenues, including telematics, saw an increase of about 20 percent year over year.