VZ Verizon Communications Inc

By Sarah Krouse 

Verizon Communications Inc. added to its pool of wireless phone subscribers in the third quarter while pressing forward with its bet that it is better to focus on building a faster network than trying to own the content that flows through it.

The largest U.S. wireless carrier by subscribers added a net 295,000 new phone connections during the period, after adding a net 199,000 of those customers in the prior quarter.

Revenue from Verizon's wireless unit -- its largest -- grew, but the carrier reported declines in its wireline and Oath media and advertising businesses. It also acknowledged that it is unlikely to meet longer-term targets set for Oath, whose former leader Tim Armstrong recently stepped aside.

Verizon has put building a faster, 5G network at the center of its long-term strategy.

Meanwhile, it faces intense competition for subscribers in a saturated wireless market. To woo customers who pay for unlimited data plans, the company has promoted its mix-and-match plans, which allow customers to select from three unlimited packages. In August, it began offering customers on unlimited plans six months of free access to Apple Inc.'s music-streaming service.

Verizon topped some Wall Street estimates of its phone subscriber growth. Wells Fargo analysts expected the carrier to add a net 200,000 postpaid phone subscribers during the quarter.

Shares rose 4% in Tuesday afternoon trading, even as the broader stock market tumbled. Verizon shares, at $57.06, are trading near their highest levels since 2000.

Verizon had 116.8 million wireless connections at the end of September, compared with 116.5 million at the end of June. It is the first major U.S. carrier to report quarterly results. Rival AT&T Inc. is slated to update investors on Wednesday.

Quarterly revenue in the Oath business, which houses AOL, Yahoo and other brands, was $1.8 billion in the third quarter, down about 7% from the same period a year earlier. Last quarter, executives faced questions from analysts about when that unit would post revenue growth, and on Tuesday Verizon acknowledged that core parts of Oath's business -- search and desktop usage -- are under pressure and that it is struggling to meet performance targets.

Verizon said Tuesday the unit's revenue is likely to be "flat in the near term", adding that it doesn't expect to meet its stated goal of Oath generating $10 billion in revenue by 2020.

Chief Financial Officer Matt Ellis said the business is focusing on news, finance, sports and entertainment content viewed on mobile devices. "When we do that, we'll be able to increase the monetization that comes through the ad technology" Oath owns, he said in an interview.

In all, net income attributable to Verizon was $4.92 billion, up from $3.62 billion a year earlier. Revenue rose 2.8% to $32.6 billion.

Verizon and other carriers have turned to gadgets such as smartwatches and connected vehicles to boost revenue. The company said it added 300,000 connections for smartwatches, connected vehicles and other gadgets, while losing 80,000 tablet connections.

Verizon's primary focus is on so-called postpaid customers who pay their bill at the end of the month under long-term contracts and are seen by carriers as valuable because they provide a stable source of revenue.

In its landline business, Verizon added 54,000 home broadband connections during the third quarter and lost 63,000 Fios video customers, continuing to suffer from customer preferences shifting toward streaming video, rather than traditional cable television.

Hans Vestberg became Verizon's new chief executive partway through the quarter, succeeding Lowell McAdam on Aug. 1.

Since then, the company has begun installing its in-home, 5G broadband service to a small subset of its customers. As part of its cost-cutting efforts, it has offered voluntary severance packages to more than 40,000 workers and signed a $700 million outsourcing agreement with Indian firm Infosys Ltd.

Verizon said it was too early to quantify how much the severance packages would cost the firm during the fourth quarter or the savings the reduced headcount would deliver in 2019.

Verizon has also taken steps to add to its network infrastructure, applying to bid in the Federal Communications Commission's upcoming millimeter-wave auctions.

Mr. Ellis said the firm was open to deals, but the carrier is "focused on running the business we have. We think most of the opportunities in front of us are ones we can develop ourselves."

Write to Sarah Krouse at sarah.krouse@wsj.com

(END) Dow Jones Newswires

October 23, 2018 12:21 ET (16:21 GMT)

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