Verizon says its still evaluating Yahoo discount as carrier sees another quarter of revenue decline

Verizon says its still evaluating Yahoo discount as carrier sees another quarter of revenue decline

Posted by John P. Bradford // October 22, 2016

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Verizon, thelargest carrier in the U.S. and owner of a largeset of media propertiesviaAOL(including TechCrunch), today reportedmixedthird-quarter earnings and saw growthin subscriber numbers. But itwas light on adetail about the big elephant in the room: would itaskfor a discount on its original, recent$4.83 billion offer to buyYahoo?

Update: During the analyst call, Verizon executives were asked about the impact of the Yahoo privacy breach on the deal.

Look, [CEO Lowell McAdam and Verizon general counsel Craig Silliman]have both commented on this recently, saidChief Financial Officer Fran Shammo. Let me just reiterate what they have said we are still evaluating what it means for the transaction.

Shammo added that Verizons lawyers had their first discussion with Yahoo about the issue yesterday and noted that it was an extremely large breach: We have to assume it will have a material impact on Yahoo.

He also suggested that there will probably be a lengthy evaluation process before Verizon makes a decision.

Verizon reported$30.9 billion in revenues for the quarter with non-GAAP earnings at $1.01. This slightlymissed and beatanalysts respectivemidpoint estimates of $31.09 billion in revenues and $0.99 for EPS. Pointedly, therevenue figure was down 6.7 percent compared with a year ago (although slightly up on the previous, consecutive, quarter), and EPS was also downnearly threepercent in the same period.

Wireless revenues, the majority of its sales, were $22.1 billion, also down by3.9 percent, as more customers continued to choose unsubsidized device payment plans.

Verizo reported 442,000 retail postpaid net additions for its Wireless division in the quarter (ex-IoT and wholesale connections IoT is another area the company very much wants to push going forward). Verizon said at the end of Q3 it had113.7 million retail connections, up only 2.6 percent year-over-year.

But there was nary a mention of the Yahoo situation in the earnings report, except to note that the deal is still ongoing. The situation, of course, is that Verizonreportedly might propose to pay as much as $1 billionless for the internet property after it revealed a security breach that affected 500 million users, and that it was allegedlyscanning customers emails on an order from the government, without disclosing that information.

(Yahoo, meanwhile, this week triedto demonstratethat the controversies have had little impact on its business.) If Verizon cancels the deal completely, it must pay a termination fee of about$145 million. We will listen to the call later to see if anything gets brought up and addressed then.

Verizonssubscriber numbers appear to be a short-term indication that at least for now its not seeing extensive churn with the arrival of the iPhone 7 and competing trade-in offers from other carriers for the newer device.

Perhaps to offset further worries around this, earlier today Verizon also reminded the public that its also taking orders for Googles Pixel phones, although it has also already warned that in store the XL model, which was due to go on sale today, is already sold out.

On the wireline front, Verizon reported revenues for Fios, its fiber-based video and internet service, of $2.8 billion, up 4.4 percent on a year ago, and a turnaround for declines in Q2 that it faced during the employee strike. It also added 90,000 internet and 36,000 customers in the quarter.

Notably, Verizon didnt mention anything in the earnings report about one of its other recent video efforts, Go90, which is an OTT play that will be one of the areas where Verizon would have integrated Yahoo. There seems to be some anecdotal evidence that its not proving to be much of a success so far.

Revenue growth for the company right now is an important metric, considering its recent track record and how it indicates that growth has gone off a cliff in the last three quarters:

Last quarter, Verizon reported EPS of $0.94 and 615,000 retail postpaid net additions in its wireless business as well as 0.94 percent retail postpaid churn, on revenues of $30.5 billion, down 5.3 percent on the year before.

In pre-market trading, Verizon shares were down by nearly three percent.

Read more: https://techcrunch.com/2016/10/20/verizon-earnings/