Verizon sees wireless margins near 50 pct: CFO – (Reuters)

Verizon sees wireless margins near 50 pct

9/23/15 Update to Verizon Wireless Margins

During Q1 2015, Verizon’s retail postpaid churn stood at 1.03%, indicating that its retaining most of its customers who approve of Verizon’s price plans and service coverage.  This number was lower than the previous quarter as well as the year before. The company’s contract free plans have also been a huge hit in the consumer marketplace and have helped to lower  its churn rate. However, competition from T-Mobile’s “uncarrier” approach, and even Sprint with its ever-changing, competitive pricing plans (and slowly improving network) are keeping Verizon on its nose, if not posing outright threats. For Instance, Sprint’s churn declined sequentially from 2.3% to 1.84% during Q1, while its postpaid net adds stood at 211,000. T-Mobile added an impressive 1.1 million net postpaid customers in Q1, while its churn rates dipped to 1.3%.

While Verizon still leads the industry in terms of overall LTE coverage, the gap with rivals has decreased significantly over the past two years.  Recently, Verizon has been focusing on strengthening its network capacity in order to maintain its pricing power, amid a surge in data usage. The company has been increasing capacity through a combination of small cell technology combined with deploying its AWS airwaves in high-traffic markets. Verizon recently spent $10.4 billion in acquiring a total of 181 licenses in the AWS-3 auction covering 192 million POPs, or around 60 percent of the U.S. population. This could eventually help the carrier increase revenues as well as profitability, since LTE networks are much more efficient than older 3G and 2G networks, and help realize higher data usage at lower cost.

As for Verizon’s margins, industry analysts expect them to rise over time.

Verizon said its wireless operating income margin in the third quarter was 31.9 percent, down from 33.8 percent in the year-ago quarter. The company said its segment EBITDA margin on service revenues was 49.5 percent, down from 51.1 percent in the year-ago period.

For landlords involved in cell tower leases with Verizon, we’d like to offer the following tips:

Verizon is, in our opinion, tied with AT&T as the most difficult wireless service provider (WSP) with whom to negotiate changes to its cell tower or cell site Lease Template. Their attorneys are mostly outsourced, and Verizon has dished out stringent requirements for what its attorneys can and cannot approve.

When it comes to site modifications, Verizon isn’t as transparent as we would like. It’s very common for the process to happen as such: You will receive a simple one-page letter stating that Verizon needs to make changes in order to “maintain its competitiveness and technological advantage”. Their letters almost always imply that said “changes” are being done in compliance with the Lease, and that a simple signature of consent is required to allow them access to your property. Unfortunately, it isn’t always true that the changes are implicitly allowed or are “in compliance” with your Lease. Of course Verizon doesn’t spell out that it might (or should) be required to pay fees for any changes. Rather, the carrier entices you to consent without question. We want you to know, that you can, in fact, gain an advantage in these equipment modification requests, and we have had ample success in providing property owners with the guidance they need to do so.

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Verizon Wireless posted a 44.5% margin for 2006 first-quarter earnings before interest, tax, depreciation and amortization. A Verizon executive apparently wonders if they can get to 50%.

Cingular announced its first quarter margin at 31.9%.

Not too shabby.

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