Telecom major Verizon (VZ) is scheduled to announce its second-quarter earnings before the bell on Tuesday, July 24. This will be the last earnings for CEO Lowell McAdam who is handing over the reins to Hans Vestberg, who will be taking over the helm with effect from August 1. The second largest US telecom firm is gearing up for the leadership transition.
Wireless division brings the lion’s share of the revenues to Verizon. Investors will be interested in the net postpaid adds number which improves the profitability for telecom carriers. Last quarter, postpaid net adds came in at 260,000. With new promotions and product launches, second-quarter net adds are expected to be better than last quarter numbers.
Another key metric to watch is service revenues which have been dwindling for more than a year. Even though last quarter service revenues were down 2.4% Verizon expects to achieve positive growth by end of 2018. As the company expects more subscribers shift towards unsubsidized plans, margins would be under pressure. At the end of the first quarter, 81% of postpaid users are under unsubsidized plans and this metric is expected to grow in the second quarter.
Another topic to take note would be the 5G launch. The company has been the front-runner when it comes to 5G and has been investing heavily to kick off the service. Fixed 5G broadband services are expected to launch in three to five markets by 2018-end starting with Sacramento and then in Los Angeles. Verizon is leading the 5G race for now with its peers are planning for launch either this year or next year depending upon feasibility.
Oath, the media division of Verizon, which was formed after merging AOL and Yahoo, is competing with the likes of Facebook (FB) and Google (GOOGL) for online ads. In April, Guru Gowrappan joined as COO of this division from Alibaba (BABA) to grow this unit. Given the growth potential of the digital business, this division’s performance will be closely tracked by investors.
Last but not the least; the company’s debt burden has been a huge concern. Long-term debt at last quarter end stood at $112.7 billion. As part of its cost-cutting efforts, the telecom giant plans to save $10 billion over a four-year period. Analysts would be interested in knowing whether the company is on track to achieve its goals.
For the quarter ended March 31, 2018, Verizon reported better-than-expected results with a 6.6% growth in consolidated operating revenues and 31% growth in net income. So far in 2018, the shares of Verizon have slipped more than 4% but increased 15% over the last 12 months.
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