On the multi-front war that is now a function of being a wireless carrier, 2016 was a watershed year for Verizon. From 4G densification to fiber, internet of things (IoT), 5G and Content, executives emphasized that the carrier made many strides forward during its fourth quarter earnings call.
Verizon’s total capex for the fourth quarter was $5.7B and $17.1B for all of 2016, consistent with company estimates, according to Matt Ellis, Verizon chief financial officer. Wireless capex totaled $3.5B in the fourth quarter 2016 and $11.2 billion for the full year, as LTE usage rose 49 percent.
“We invested in adding capacity through densification of the 4G network, acquired telematics and smart city businesses and extended ecosystems to monetize data traffic,” Ellis said.
Organically, internet of things revenue was $243 million, up 21 percent in the fourth quarter. Including acquisitions, IoT revenue increased more than 60 percent in the fourth quarter.
IoT profits helped offset lost earnings from the divested wireline market, Ellis said.
Verizon began its fiber optic network deployments in Boston during the quarter. Its pending XO Communications acquisition will also add to its fiber footprint with additional metro rings in 45 out of the top 50 markets.
“Fiber is an important element of our wireless networks as it allows us to strengthen our 4G LTE capacity, which also preparing for 5G, Ellis said.
5G is a focus for Verizon, Ellis said, and the carrier is launching about 10 pre-commercial pilots across the country with multiple use cases including dense urban and suburban neighborhoods.
“Our goal is to test the 5G fixed wireless technology in different environments in order to successfully operationalize 5G for a commercial launch,” he said.
Verizon is expanding its platforms and building new business models to monetize digital mobile video traffic on its network. AOL’s content and ADTECH capabilities, as well as the go90 “social entertainment” pay service and other content, also have added to Verizon’s video offerings. go90 users average 30 minutes per viewer a day, with less than 20 percent of traffic surfed on the wireless network in the second half of the year.
In 2016, through a joint venture with Hearst, Verizon launched unique content through Complex Media and a 25 percent stake in AwesomenessTV, and we are looking forward to expanding these offerings this year.
“With a focus on delivering timely, short form versions of video clips we have seen digital video consumption gain traction in the last year,” Ellis said. “We have seen increased usage in the go90 application through this exchange and we are expanding our unique content offerings.”
While the IoT may still seem ethereal to some, Verizon continued to take concrete steps to expand into this area. In September, it purchased Sensity, which enables light owners to embed networking technology within retrofit and new LED luminaires.
In November, Verizon purchase LQD WiFi, whose Palo technology hubs allow “citizen engagement experiences” as well as security, transportation, and wayfinding service. Not to mention Wi-Fi capabilities.
“We now have a deep inventory solutions on our IoT platform to provide to our customers,” Ellis said. Overall, we are confident in our ability to execute deliver results and return value to our shareholders while continuously transforming the business.”
In July, Verizon Telematics purchased Telogis, a fleet navigation Software-as-a-Service (SaaS) provider with distribution through Ford, General Motors, Hino, Isuzu, Mack and Volvo’s Class 8 truck unit.
A Transcript from Seeking Alpha was used in this article.
Tier 1 wireless carriers’ 2Q16 financial results showed aggregate capital expenditures (capex) growing 11 percent sequentially from 1Q16 but at lower levels, down 14 percent, compared to spending in 2Q15.
The good news is that the Tier 1s maintained their guidance for full-year capex. AT&T was the outlier suggesting its 2016e capex is trending towards the “low end of the range” without specifying a number.
The Tier 1s, collectively, are planning network investments totaling $26.9 billion in 2016e. That figure is down 11 percent from the $30.2 billion these national carriers spent in 2015. The Tier 1 carriers account for an estimated 96 percent to the total public wireless carrier capex in the United States.
Yet capital spending remains heavily concentrated. Verizon leads the pack with $11 billion or 41 percent of the Tier 1s’ total. Followed by AT&T at 31 percent of the total.
The lion’s share of the investment, more than 60 percent, is applied to radio access network (RAN) infrastructure – macrocells, small cells and DAS. All carriers still are spending on macrocell upgrades and expansions to 4G LTE coverage and capacity in multiple frequency bands. Network densification is accelerating, however, with a shift in spending toward indoor and outdoor small cells, and in-building DAS deployments.
The Tier 1s spent $12.9 billion or 48 percent of their aggregate 2016e budget through mid-year. The $6.8 billion in 2Q16 was up 11 percent sequentially from $6.1 billion in 1Q16 but down 14 percent compared to $7.9 billion in 2Q15.
Capex among Tier 1s should ramp steadily through the balance of the year, even at reduced levels from 2015. We expect 3Q16 spending to stay flat with 2Q, then uptick by 8 percent to $7.2 billion in 4Q16 as the Tier 1s round out their full-year budgets.
The lower but steady spending is little conciliation for wireless equipment vendors and professional service providers for the current year, at least. Nonetheless, accelerated infrastructure spending through year-end, mainly to meet unrelenting mobile data demand, bodes well for continued network expansion into 2017 and beyond.
John Celentano is a principal in Skyline Marketing Group, which provides technology marketing & sales strategy advisory in advanced communications services, and wireless, telecom, data networking infrastructure markets. Additionally, support is provided for internal positions in market analysis, business development, strategic planning, strategic marketing, product management, product marketing, sales operations.
For more information, go to https://www.linkedin.com/in/john-celentano-4822692
August 9, 2016 — Accelerating its penetration into fleet telematics, Verizon Communications will acquire Fleetmatics, a global provider of fleet and mobile workforce management solutions, for $2.4 billion in cash. The announcement came less than a month since Verizon Telematics purchased Telogis, a fleet navigation Software-as-a-Service (SaaS) provider with distribution through Ford, General Motors, Hino, Isuzu, Mack and Volvo’s Class 8 truck unit.
“The powerful combination of products and services, software platforms, robust customer bases, domain expertise and experience, and talented and passionate teams among Fleetmatics, the recently-acquired Telogis, and Verizon Telematics will position the combined companies to become a leading provider of fleet and mobile workforce management solutions globally,” said Andrés Irlando, CEO of Verizon Telematics.
Headquartered in Dublin, Ireland, with North American headquarters in Waltham, Mass, Fleetmatics has more than 37,000 customers, 737,000 subscribers and 1,200 personnel. The company’s Web-based solutions provide fleet operators with visibility into vehicle location, fuel usage, speed and mileage, and other insights into their mobile workforce, helping them to reduce operating costs, as well as increase revenue.
“Verizon and Fleetmatics share a vision that the SaaS-based fleet management solution market is extraordinarily large, lightly penetrated, global and fragmented which can best be attacked together with a world class product offering and the largest distribution channel in the industry,” Jim Travers, chairman and CEO of Fleetmatics.
Verizon Telematics, a subsidiary of Verizon Communications, operates in more than 40 markets worldwide and offers comprehensive wireless, software and hardware solutions to consumers, enterprises, automakers and dealers to power connected-vehicle products around the world.
July 26, 2016 — Verizon has announced its plan to acquire Yahoo!, which has more than 1 billion monthly active users, including 600 million monthly active mobile users through its search, communications and digital content products. The deal is worth $4.83 billion in cash.
Yahoo also connects advertisers with target audiences through an advertising technology stack that combines data, content and technology.
“Just over a year ago we acquired AOL to enhance our strategy of providing a cross-screen connection for consumers, creators and advertisers,”said Lowell McAdam, Verizon chairman and CEO. “The acquisition of Yahoo will put Verizon in a highly competitive position as a top global mobile media company, and help accelerate our revenue stream in digital advertising.”
Yahoo and AOL are two of the pioneers that popularized the Internet with email, search and real-time media, but each had struggled to remain relevant as social media took the stage as the primary way Millennials communicate.
The addition of Yahoo to Verizon and AOL will create one of the largest portfolios of owned and partnered global brands with extensive distribution capabilities. Combined, AOL and Yahoo will have more than 25 brands in its portfolio for continued investment and growth. Yahoo’s key assets include premium content brands in major categories including finance, news and sports, as well as an email service with hundreds of millions monthly active users. Additional technology assets in the advertising space include Brightroll, a programmatic demand-side platform; Flurry, an independent mobile apps analytics service; and Gemini, a native and search advertising solution.
July 6, 2016 — Verizon Telematics, whose “hum” consumer vehicle connectivity business contributed 176,000 connected device adds in Q1 of this year, has purchased Telogis, a fleet navigation Software-as-a-Service (SaaS) provider with distribution through Ford, General Motors, Hino, Isuzu, Mack and Volvo’s Class 8 truck unit.
“This unit should serve as a nice complement to VZ’s [consumer vehicle] telematics division,” wrote Jennifer Fritsche, senior analyst, Wells Fargo Securities, wrote. “We believe this acquisition represents an interesting strategic move to ramp up its scale in the telematics space.”
Verizon’s purchase of Telogis will create one of the largest telematics company in the United States and it marks the first time a wireless company has bought a telematics concern, according to Fritzsche.
“But we do not think it will be the last. The telematics industry is highly fragmented with many smaller players funded by venture capital. We expect to see additional consolidation among these players to scale their platforms and appeal to a wider base of customers,” she wrote.
Terms of the transaction have not been disclosed and it is expected to close in the second half of 2016. PJT Partners and Wells Fargo Securities, LLC acted as financial advisors and Debevoise & Plimpton acted as legal advisor to Verizon. Barclays and J.P. Morgan acted as financial advisors and Paul Hastings acted as legal advisor to Telogis.