Disrupted Verizon Business Segment Buoyed By Strong Wireless, SMB Revenue

Verizon’s enterprise and wireline segments continue to take hits due to macro pressures from the pandemic and inflation. Verizon CEO Hans Vestberg took to the carrier’s earnings call to thank longtime Verizon Business CEO Tami Erwin, who is set to retire at the end of the year, for her hard work.

Verizon CEO Hans Vestberg

Telecom giant Verizon’s Business segment continues to run up against wireline headwinds and enterprise declines due to ongoing upheaval from the pandemic, but Business wireless and the flourishing SMB segment are lifting the unit during uncertain times, according to Verizon.

On the Business and Consumer fronts, Verizon‘s fiscal second-quarter 2022 revenue fell short of the carrier’s expectations, which Verizon attributed in part to inflation. CEO Hans Vestberg said he believes the issues will be a short-term problem and that Verizon has the right assets, including its network, edge compute and 5G, to generate stronger revenue.

“We think it’s a short-term challenging time right now. … With everything we’ve done in the last five years with the network, divestments and acquisitions, we’re positioning ourselves for a good, long-term strategy in a market where mobility, broadband and cloud are the most critical assets for businesses,” Vestberg said during the company’s second-quarter 2022 earnings call.

[Related: VERIZON BUSINESS NAMES NEW LEADER AS TAMI ERWIN SET TO DEPART AT YEAR’S END]

Business wireless service sales grew for the seventh consecutive quarter and climbed 3.0 percent during the second quarter to $3.18 billion compared with $3.09 billion in second-quarter 2021. Matt Ellis, Verizon’s executive vice president and CFO, said that business wireless growth was primarily driven by momentum in SMBs and the best performance in Global Enterprise since first-quarter 2020.

The Basking Ridge, N.J.-based carrier said it expects business wireless service growth to continue to expand over the rest of 2022.

Verizon Business reported 430,000 wireless retail postpaid net additions in second-quarter 2022, including 227,000 phone net additions. The results marked the third consecutive quarter that Business reported more than 200,000 postpaid phone net additions. Phone gross additions in Business increased nearly 30 percent year over year.

Total operating revenue for Verizon Business, which includes the company’s Global Enterprise Solutions, SMB, public sector and wholesale businesses, dipped 1.8 percent with revenue of $7.63 billion during the second quarter compared with $7.76 billion in the year-ago quarter.

Global Enterprise Solutions revenue, which has felt the brunt of the financial fallout from the pandemic, continued its decline by 7.0 percent to $2.40 billion in revenue in second-quarter 2022 compared with $2.53 billion a year ago, which the carrier attributed to migration pressures away from legacy technologies, a trend that Verizon expects to continue, Ellis said.

SMB revenue, on the other hand, grew 6.8 percent during the quarter to $3.09 billion from $2.89 billion in the year-ago period. Public sector saw a decline of 6.8 percent to $1.50 billion during the quarter compared with $1.61 billion last year. Wholesale revenue also continued to decline, falling 6.1 percent to $629 million from $670 million during the second quarter of 2022.

Vestberg thanked Verizon Business CEO Tami Erwin, a 35-year veteran of the company, for her work propelling the business segment‘s growth. Erwin is stepping down at the end of 2022 and taking her place will be Sowmyanarayan Sampath, who has served as Verizon’s CRO since April 2021.

“Sampath brings over two decades of experience in digital networks, critical infrastructure and a deep understanding of how networks play a role in enterprise growth and global security. … I know that he is the right leader to take Verizon Business forward,” Vestberg said.

Verizon said it continues to see strong interest from enterprises for private wireless and mobile edge compute. The carrier in 2020 partnered with Amazon Web Services to combine its 5G Edge mobile compute platform with AWS’ compute and storage capabilities.

“Private networks are the gateway to mobile edge compute, which are delivering game-changing customer outcomes,” Vestburg said. “During the second quarter, we extended our MEC [mobile edge compute] ecosystem with AWS Wavelength cells and we now reach 90 metro areas. This means that 75 percent of the U.S. population is now within 150 miles of Verizon‘s 5G edge.”

For the second quarter of the year, which ended June 30, 2022, Verizon reported operating revenue of $33.79 billion, staying relatively flat from second-quarter 2021’s result of $33.76 billion. The carrier’s net income dipped 10.7 percent in the quarter to $5.32 billion compared with $5.95 billion during the same period last year. Verizon reported diluted earnings per share of $1.24 in second-quarter 2022, a 11.4 percent drop-off compared with $1.40 in second-quarter 2022.