Verizon (NYSE:VZ) on Tuesday reported net income of $22.6 billion for 2021, up 23% from $18.3 billion in 2020 and up 14.4% from $ 19.8 billion in 2019.
“The assets are in place to make 2022 Verizon’s best year yet,” CEO Hans Vestburg said during the company’s earnings call.
Despite the increase, JPMorgan (NYSE:JPM) analyst Philip Cusick today downgraded the company, writing, “We are increasingly concerned about the subscriber growth outlook for postpaid phones in 2022 for Verizon and the industry overall, even beyond 1Q, which is seasonally soft and where we expect Verizon to post subscriber losses.”
Analyst Craig Moffett of MoffettNathanson echoed Cusick on Tuesday, noting, “Verizon will need to show that it can actually grow. On that score, we remain skeptics.”
Revenue in Verizon’s business segment fell to $7.8 billion in Q4 2021 from $8.1 billion in Q4 2020.
Verizon’s guidance calls for revenue growth of 1% to 1.5% in 2022, with wireless service revenue growth of 9% to 10%, but only 3% with the exclusion of TracFone, the low-price postpaid provider that Verizon acquired in late 2021. Verizon will be spending to grow TracFone, JPMorgan’s Cusick said in a Dec. 22, 2021, note.
Although Verizon predicts lower “business as usual” capital expenditures of $16.5 billion to $17.5 billion, compared with $17.9 billion in 2019, it is also predicting one-time expenditures of $5 billion to $6 billion for the rollout of C-band spectrum. Verizon’s analyst day is March 3, when it will disclose more about the C-band buildout, Vestberg said.
Verizon’s millimeter-wave spectrum, which delivers the top wireless speeds, now serves nearly 10% of urban traffic, he added.
Verizon’s fixed wireless growth
The company added 78,000 fixed wireless access (FWA) subscribers in the final quarter of 2021. These customers, who receive their home broadband via the company’s wireless network, totaled approximately 223,000 households at the end of the year, CFO Matt Ellis said on the call.
The FWA segment has room to grow, as the company reported 20 million homes passed by the end of Q4 2021, surpassing the target of 15 million.
“Verizon is offering consumers on premium unlimited mobile plans the opportunity to add 5G home service for as little as $25 per month,” Tammy Parker, GlobalData principal analyst for global telecom consumer services, told Connectivity Business. “Verizon’s new bundled pricing offers set up the operator for even more striking wireless internet customer gains heading into 2022, considerably impacting the overall competitive landscape.”
However, “[a]ll eyes are now on T-Mobile US (NASDAQ:TMUS), which is due to release its earnings next week and has already announced 224,000 … customer adds for Q4 2021, which is more than Verizon’s total FWA base of 223,000,” Parker said.
AT&T increases leverage after FCC Auction 110
AT&T (NYSE:T) in the recent FCC Auction 110 spent $9 billion. Investors will be looking forward to AT&T’s virtual analyst event in March to learn more about AT&T’s plans for the spectrum it won in the auction with the highest bid. The quiet period is still in effect and the company is not yet able to discuss the auction.
“When last we opined on AT&T, we called them spectrum deficient and over-levered. Now, after the 3.45 GHz auction, they are less spectrum deficient … but more over-levered,” MoffettNathanson’s Moffett said in a note today.
AT&T’s debt-to-adjusted EBITDA ratio rose to 3.2x by the end of Q4 2021, according to the earnings release.
AT&T predicts capex of $20 billion in 2022 compared with $19.6 billion in 2019, a number that excluded vendor financing of $3 billion in 2019. Vendor financing will be around $4 billion in 2022, CFO Pascal Desroches said on the call, referring further analyst questions to the March virtual analyst event.