Verizon Needs Verizon Wireless More Than Ever [Seeking Alpha]

Verizon Communications Inc. (VZ), with a market cap of $149.49B, provides communications, information and entertainment products and services. Verizon operates in two main segments, including Wireline and Verizon Wireless. While Verizon owns the majority share of Verizon Wireless, Vodafone Group (VOD) owns 45% stake in Verizon Wireless, which is the largest wireless communications services provider in the United States. On April 18, 2013, VZ reported Q1 earnings with strong profit but light revenue.

Strong Results from Wireless

For Q1, 2013, VZ’ EPS increased 15% to 68 cents per share as compared to the year-earlier period, beating analysts’ expectation of 66 cents per share. However, revenue of $29.42B was below analysts’ estimates of $29.55B. The highlight focuses on Verizon Wireless, which added 677,000 “postpaid” customers with service contracts, and the wireless revenue increased 6.8% to $19.5B. VZ also activated 4 million iPhones in the quarter, where the total smartphone activations were 7.2 million for the period. The earnings call transcript for Q1, 2013 result can be accessed here at Seeking Alpha.

Margins

The management does not expect much EBITDA wireline service margin expansion in 2013, but is positioned to improve the margin in 2014. For the wireless end, wireless margin has a target of 49-50 percent. Verizon Wireless was helped by lower costs and the popularity of its data share plans. On the down side, the management noted the cautious behavior from enterprise customers.

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