Cash Flow from Operations Continue To Remain Solid for Verizon Communications Inc. (VZ)

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Verizon Communications Inc. (NYSE:VZ)’s free cash flow grew to $18.8 billion, which excluded proceeds from the tower. Similarly, its cash flow from operations increased 19.1% to $38.9 billion, which included tower proceeds of less than $2.4 billion. As a result, it was able to accelerate its share buyback program to deliver over $13.5 billion of value to its shareholders. Considering the capital-intensive nature of the telecom sector, the cash flow from operations assumes importance.

Net Addition Of Subscribers

Verizon Communications Inc. (NYSE:VZ) witnessed a slower pace of subscribers additions in the fourth quarter. It could add a net 1.5 million subscribers for its wireless retail postpaid section, which was lower than the nearly two million additions last year. However, the latest quarter addition were better than the analysts’ consensus estimation of 1.42 million. The subscribers’ additions came against the odds like the wireless market was at a saturated level while even smaller rivals offered 50% discount to encourage subscribers to switch network. T-Mobile US Inc (NASDAQ:TMUS) even offered a free video streaming plan.

As a result, the company too came out with seasonal holiday offers like $100 off on some phones while $300 was given as credit to trade in some cases. Another key factor is that its churn rate or customer defections in its postpaid unit slipped to 0.96% from 1.14% in the previous year quarter. The telecom firm said that 4G LTE devices advanced 25% in the fourth quarter as 906,000 new 4G LTE smartphones were added. However, the average revenue per account (ARPA) dipped 6.6% to $148.30 and came in below the analysts’ expectations of $149.61. Verizon Communications Inc. (NYSE:VZ) needs to curb the drop in ARPA in the current year.

Investments In Mobile-Video Service

The telecom company, which witnessed 3.2% growth in revenue including AOL, Inc. (NYSE:AOL), is focus investments on its new ‘go90’ mobile-video service, as well as, ‘Internet of Things’. The top service provider wants to take advantage of the IoT to connect everything, be it industrial machines or household devices to the Internet. The focus on these two areas would boost its revenue in the upcoming quarters. In 2015, IoT offerings delivered 18% growth in revenue to $690 million.

Verizon Communications Inc. (NYSE:VZ)’s other key factors in the fourth quarter were its total Fios revenue advanced 6.8%. However, its global enterprise and whole sale revenue dipped 3.3% and 0.2% respectively in the Wireline segment in the fourth quarter. Smartphone penetration also increased to 84% from 79% in the year-ago quarter. Significantly, the company claimed that 93% were 4G LTE while 90% of the total data traffic was on 4G LTE network.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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