Verizon is feeling the squeeze from COVID-19, causing the operator to withdraw its revenue outlook for the year, but it maintains that 5G deployments are continuing as planned.
The company today also tempered its earnings-per-share guidance, which it now expects to fall somewhere between a 2% decline or a 2% gain. Verizon, like all operators, relies heavily on customer growth and device sales but those dipped significantly during the final month of the first quarter of 2020, it told analysts.
Roughly 70% of Verizon’s stores are currently closed, 85% of its workforce is working remotely, and more than 20,000 employees are being retrained, according to the company.
Verizon is also providing short-term relief to customers that are unable to pay bills due to issues related to the COVID-19 pandemic, and that caused revenue to decline during the quarter. CEO Hans Vestberg told CNBC that payments from customers impacted by the coronavirus outbreak improved during the last week and the company is encouraged by that trend.
Verizon Anticipates Clarity in 90 Days
“We will definitely know more in the next 90 days,” he said during a CNBC interview after the earnings release. “Long term we take the right decisions to occur, that might be a little bit painful, but long term we will become stronger after this.”
Verizon banked almost $4.29 billion in net income on $31.6 billion in revenues during Q1. Those results mark a 16.9% year-over-year decline in profit and a 1.6% dip in revenue.
The operator responded to the pandemic in mid-March with a $500 million increase in capex for the year and Verizon has yet to pull back from those plans. It also reached an agreement to acquire video conferencing app BlueJeans for under $500 million last week.
Verizon’s 5G Strategy Faces Challenges
Verizon’s 5G network was live in 34 U.S. cities at the end of the quarter, and Vestberg said 5G deployments are still on track. Unlike AT&T, which reported issues with permitting and gaining physical access to sites amid widespread lockdown measures, Vestberg claimed Verizon isn’t experiencing any delays.
“So far we are on plan with our deployment of 5G nationwide, our cities and how many radio base stations we want to do, as well as on our fiber rollout,” he told CNBC. Verizon’s workforce has found ways to continue working through permitting issues with municipalities and it has strong connections with its supply chain, which hasn’t been impacted thus far, he said.
“So far we haven’t had any problems. We are on plan. There might be problems because there’s a lot of unknown out there, but I have a lot of confidence in my team that they will continue to execute,” he said.
Analysts at MoffettNathanson took a generally positive view of Verizon’s performance during a turbulent quarter. “Verizon isn’t AT&T. Verizon will be fine. But longer-term questions remain,” the firm wrote in a research note.
“Verizon’s overreliance on millimeter-wave (mmWave) spectrum as the basis of their 5G deployment strategy leaves them well positioned only in dense urban settings, and indeed, only in dense urban gathering places,” the analysts wrote. “No one is in dense urban gathering places right now. Verizon is therefore earning no return at all on its early 5G investments. They remain exposed for coverage everywhere else.”
The firm added that it’s becoming increasingly clear that the industry’s path to 5G will be slowed. “Given the magnitude of the current crisis, survival may be more important than growth. Obviously, Verizon will survive. But the longer-term growth picture coming out the other side of COVID is still very much in question.”