Verizon suffered its second consecutive disastrous quarter as the effects of rampant inflation slammed the company's wireless business, where it added only 12,000 new subscribers during the second quarter of 2022, falling woefully short of the roughly 167,000 net subscriber additions expected by analysts.
“The inflationary environment is clearly impacting consumer behavior, and we also saw intensified competition for consumer attention,” said Verizon Chairman and CEO Hans Vestberg, during the company’s Friday morning earnings call. He also said that the quarter generally was “not a good barometer for where Verizon has been or where it’s going.”
Verizon CFO Matt Ellis added, “Regarding inflation, we are seeing the pressures within our cost structure, most notably on labor costs, utilities, and transportation and logistics expenses. We expect these pressures to accelerate in the second half of the year and have an impact on profitability and earnings.”
The company’s Tracfone acquisition helped it achieve 9.1% wireless revenue growth during the second quarter compared to last year, but overall revenue from services and other segments fell by 3.9%, and net income was down 10.7% year over year. Consolidated revenue was flat at about $33.8 billion for the quarter. Also, Verizon Business revenue was $7.6 billion in second-quarter 2022, down 1.8 percent year over year.
The company did not break out wireline revenue in detail during its earnings call, but Vestberg and Ellis both referred to ongoing legacy wireline revenue losses as adding to Verizon’s current challenge.
There were a couple of bright spots. Verizon’s new fixed wireless access offering posted 256,000 net additions, up 32% from the first quarter, and within that consumer net additions for the fixed wireless offering increased 50% quarter to quarter.
In broadband, Verizon reported total net additions of 268,000 subscribers, including the 256,000 fixed wireless net additions. Total broadband net additions increased 39,000 from the first quarter of 2022, and fixed wireless net additions increased 62,000 from the first quarter of 2022. Verizon reported 36,000 net additions for its Fios Internet service.
As a result of the rough quarter, Ellis said Verizon was adjusting guidance, lowering wireless service revenue expectations from prior guidance of a 9-10% increased to growth of 8.5 to 9.5%. Also, guidance for service and other revenue growth is now expected to be down about 1%, an update from prior guidance for reported service and other revenue growth to be approximately flat.