Verizon Says 2016 Earnings May Plateau at 2015 Levels

  • The wireless carrier cites managing 'near-term impacts'
  • CEO McAdam: Company will restart sales growth by 2017

Verizon Communications Inc. says 2016 earnings could plateau at 2015 levels as the company focuses on mobile and digital media while shedding some landline telephone operations.

Verizon Chief Executive Officer Lowell McAdam, speaking at a conference held by Goldman Sachs Group Inc., likened the shift to the telephone industry’s transition from copper to fiber-optic phone networks, which required a period of investment before a new sales growth.

“We’re shifting the framework of this business more onto digital media than our traditional businesses,” McAdam said. “The comps will be a little difficult for us in 2016."

The company will restart sales growth by 2017, McAdam said.

From 2011 and 2014, Verizon saw an average annual revenue growth of about 5 percent. For 2016, the company estimates 1.6 percent growth.

Shares fell 2.1 percent to $45.23 at the close in New York, putting the stock down 3.3 percent this year.

Mobile Video

Verizon is dealing with declining landline revenue, the sale of wireline operations to Frontier Communications Corp., and the ramp up of new business like mobile video.

Last week, Verizon began offering a free mobile video service -- called go90 -- at teens and millennials. The company invited 5 million of its wireless users to the service and has signed on 25,000 subscribers so far, McAdam said.

Verizon has staked a big part of its future on mobile video and new revenue from AOL’s ad-placement technology. The company is hoping go90 users will help spread the word of the service “virally” with friends ahead of a more formal introduction at the end of the month.

“Millennials who do a lot of sharing on Facebook and Twitter can do that on go90,” McAdam said.

Verizon still faces a number of challenges: It must compete against new streaming services from Dish Network Corp.’s Sling TV along with the more-established, mobile-friendly streaming services of Netflix Inc., Hulu, HBO, Inc. and Comcast Corp. Verizon enters the market without deep video libraries or live network broadcasts.

Labor Discord

Verizon is also in the middle of negotiations with the Communications Workers of America to replace a union contract that expired August 1.

During McAdam’s appearance, about 30 union workers and representatives protested outside the entrance to the conference center in lower Manhattan, next to a large pig balloon on the sidewalk.

Verizon wants to lower health-insurance costs by increasing employee contributions, among other proposed cost-saving measures.

“We aren’t asking for much as far as improvements, but we want to keep what we have,” said Mike Baxter, a vice president for CWA local 1101, who joined the protest at the conference.

In an interview Thursday, McAdam said the discussions are continuing.

“I don’t think anyone is happy with how long this is taking, but these are tough issues. We want more workforce flexibility and we have to address rising medical costs,” McAdam said.

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