Verizon (VZ) Updates on Q4 Wireless, Wireline Performance; Sees EBITDA Pressure on Promotions

Verizon Communications (NYSE: VZ) announced that it continues to see strong momentum for wireless customer growth in the fourth-quarter 2014.

The company reported very strong customer demand for 4G smartphones and tablets on its More Everything shared data plans on the nation's most reliable wireless network in the fourth quarter to date.

Verizon is driving retail postpaid gross additions that are higher both sequentially and year over year. New device launches are driving significant customer phone upgrades. These are on pace to total as much as 9.5 percent of the postpaid customer base by the end of the quarter.

Approximately three out of four upgrades were strategic or high-quality – meaning they were from a basic phone or a 3G smartphone or a high-value customer. The percentage of customers choosing the Verizon Edge equipment-installment plan option so far in fourth-quarter 2014 is tracking to 24 percent, or double the rate of third-quarter 2014, which was approximately 12 percent of total phone activations.

As the company is accelerating the upgrades of high-quality customers to 4G, total retail postpaid disconnects are trending higher both sequentially and year over year in this highly competitive and promotion-filled fourth quarter.

The company expects that the fourth-quarter impacts of its promotional offers, together with the strong customer volumes this quarter, will put short-term pressure on its wireless segment EBITDA and EBITDA service margin (non-GAAP, based on earnings before interest, taxes, depreciation and amortization) as well as its consolidated EBITDA margin (non-GAAP) and earnings per share.

In wireline, FiOS continues to drive consumer-revenue growth, while global enterprise and wholesale growth remain under both secular and macro-economic pressure. The company reiterated that it remains on track to achieve full-year expansion of the wireline segment EBITDA margin (non-GAAP).

The company also reiterated that capital spending for 2014 is estimated to be around $17 billion.

Verizon will report fourth-quarter 2014 results on Jan. 22.

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