While Verizon reported strong first quarter earnings overall, the nation's largest carrier lost more mobile subscribers than expected during the Q1. From January through March, including business and consumer accounts, the carrier lost 178,000 wireless phone subscribers which was well beyond the 121,700 loss estimated by FactSet. The company's wireless business grossed $16.7 billion during the quarter for a 2.4% increase year-over-year, and overall retail postpaid churn was 1.03% while retail postpaid phone churn came to .81% for the period.
Verizon loses 225,000 net postpaid consumer phone subscribers during Q1
Consumer wireless revenue was $13.7 billion during Q1, an annual increase of 1.5%. Helping lead the way was the adoption of wireless and premium unlimited plans. The consumer wireless business lost 326,000 postpaid customers during the three months including 225,000 phone net losses, 171,000 tablet net losses, and the addition of 70,000 connected device users. Consumer retail postpaid churn was .97% during Q1 while retail phone postpaid churn was .77%.
Citing the recent C-Band auction of mid-band spectrum that Verizon spent a leading $45 billion on, Chairman and CEO Hans Vestberg said:
"Verizon is off to an excellent start in 2021 as we met the challenge of intense competition in the first quarter by achieving revenue growth across our three business segments. This year began with a transformative milestone for our company with our success in the recent C-Band spectrum auction. We continue to strengthen our networks, execute on our Network-as-a-Service strategy and focus on the five vectors that underpin our growth framework and position us to deliver success in 2021 and beyond."
Verizon paid the FCC $45 billion during Q1 of this year to cover the cost of the mid-band spectrum it won during the C-Band auction. Verizon borrowed $12 billion during the fourth quarter of 2020 and $31 billion last March. The company plans on laying out $17.5 billion to $18.5 billion on capital spending this year to expand 5G mmWave service in both new and existing markets.
An additional $2 to $3 billion will be spent this year related to the deployment of the C-Band 5G network. The C-Band spectrum will add much needed mid-band spectrum to the company's inventory as Verizon decided to build its 5G network around mmWave airwaves. But high band spectrum doesn't travel that far although it does deliver the fastest 5G download data speed.
As a result, only a limited number of Verizon subscribers receive the blinding fast 5G speeds that consumers have been hearing about. And the carrier's nationwide 5G coverage uses Dynamic Spectrum Sharing (DSS) which is actually slower than 4G LTE. Thus, spending $45 billion on mid-band airwaves might be the most important expenditure Verizon will make this year.
Verizon CFO Matt Ellis said, "The strength in our core business is driving higher revenues and strong demand for our products and services. We delivered strong operational and financial performance, giving us positive momentum as we end the first quarter. High quality, sustainable wireless service revenue growth, a recovery in wireless equipment revenues, strong Fios momentum and excellent Verizon Media trends led the way."
The decline in Verizon's postpaid phone subscribers during the first quarter could give T-Mobile the opportunity to close the gap between the hard charging second place carrier and the wireless provider it is chasing. T-Mobile is expected to report its first quarter 2021 earnings on May 5th.
During the first quarter, Verizon reported earnings per share (EPS) of $1.27, up from the $1.00 EPS it earned during the same quarter last year. The company's stock closed at $58.14 for a loss of 25 cents or .43% on Wednesday.
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