Verizon Earnings: What to Expect
Verizon is facing some major challenges, and it's looking for some new growth drivers.
Americans are cancelling their landline service or switching to digital phone service through cable providers.
There are the sector-wide issues: cash-strapped consumers are downsizing their phone spending and searching for better deals, and the fact that the mobile phone market is increasingly saturated and competitive.
Plus Verizon has its own share of challenges, like trying to compete with AT&T which has the exclusive deal with Apple's iPhone.
Wall Street expects Verizon, the second largest telecom company and the largest wireless service provider to report earnings of 59 cents per share, flat with last year, and a 10 percent increase in revenue (thanks to its acquisition of Alltel) to $27 billion.
Verizon's wireless numbers will be in the spotlight. The market is increasingly crowded as low cost players come in with cheap deals for consumers. Analysts are concerned that this may force Verizon to drop its prices, hurting its margins.
Plus the wireless market is nearly entirely saturated, so growth across the industry is slowing. Then there's the fact that Verizon can't take advantage of all the upside from the wireless industry — it owns just 55 percent of Verizon wireless, the rest is owned by Vodafone.
Verizon is also looking to take a piece out of the cable sector's market share. Last week it announced some new aggressive packages and offers: a "quadruple play." The idea is to include its wireless — its area of strength — in its bundles to lure in customers.
But because it's only economically viable to roll out FIOS to some 18 million homes, the potential upside from its success — and it is successful — is limited. At the same time the potential downside for cable companies Comcast and Time Warner Cable is also limited.
Another factor Verizon is hoping will help its results: a new smartphone. In the next few weeks Verizon will launch the Google -powered Motorola "Droid" phone. It may not have the cache of the iPhone, but they're hoping it'll attract a following, and if not draw new subscribers, prevent others from switching to AT&T for its iPhone.
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