Execs: Verizon Wireline Segment Will Be Affected By Staff Reductions

Verizon executives gave a glimpse Tuesday on just what division would be affected most by its “voluntary separation program” that would reduce the telecommunications giant’s payroll by more than 10,000 employees.

Verizon CEO Hans Vestburg told investors on Tuesday morning that between the buyouts, changes within the Verizon Media segment, and plans to rely more on IT outsourcing, the carrier is in the midst of a company-wide realignment.

Verizon's wireline segment -- which offers voice, data and video communications products and services -- once again saw a soft Q4, and executives confirmed that the business unit, which includes Enterprise Solutions, Partner Solutions, Business Markets segment and Consumer markets, will be affected by the job cuts in order to offset revenue declines in legacy technologies that are still plaguing the business unit.

Matt Ellis, Verizon's executive vice president and CFO. said that the segment will “see a good part of the benefit from the voluntary severance program. That, in addition to the other ongoing cost actions we continue to take, should be of assistance to wireline margins in 2019.”

Vestburg for the past year has been focusing Verizon around network transformation and 5G, while at the same time, restructuring its customer-facing units, an effort Vestburg is calling "Verizon 2.0." "These initiatives, along with our Verizon 2.0 operating model, will position us to be even more competitive in a rapidly-changing environment," he said during Verizon's Q4 2018 earnings call.

The Basking Ridge, N.J.-based carrier in September revealed an early-retirement buyout offer to thousands of its employees. The deal is aimed at helping Verizon trim its costs by about $10 billion by 2021. At the end of 2018, about 10,400 Verizon employees accepted buyouts, and their jobs will be eliminated during 2019.

[Related: Verizon Media To Lay Off 7% Of Workforce As Unit Struggles To Gain Traction]

Verizon's Wireline Division declined 3.2 percent to $7.37 billion during the fourth quarter of 2018 from $7.62 billion in the year-ago period. Verizon Enterprise Solutions declined about 3 percent to $2.17 billion in revenue, compared to $2.27 billion in the year-ago quarter. Partner Solutions revenue took the biggest hit, dropping 9.2 percent to $1.09 billion during Q4 2018, down from $1.21 billion in the year-ago period. Revenue for Verizon Business markets also declined 5.5 percent down to $836 million from $885 million one year ago.

Pricing pressures and declines in legacy technology areas continue to present "strong headwinds" for Verizon's Enterprise, Partner Solutions, and Business Markets segments, according to Ellis. However, Verizon's plan to counter the declines is to continue to invest in its fiber-based solutions and new applications, such as SD-WAN, to drive growth in these weaker units, Ellis said.

"We remain confident that we can continue to generate growth and momentum in fiber and new applications," Ellis said.

Last year during the carrier's Q1 2018 earnings call, Verizon said it would be leaning heavily on 5G and Oath, the carrier's media-focused business unit now known as Verizon Media, as a way to differentiate in the crowded telecommunications market. The media-focused business unit, which houses its AOL and Yahoo assets, never gained traction and "wasn't as big of a contributor to earnings" as the carrier would have liked, Ellis said during the Q4 call. As a result, Verizon Media earlier this month informed its staff that 7 percent of its global workforce across the organization -- about 800 positions -- well as certain brands and products, will be eliminated.

Revenues for Verizon Media dipped 5.8 percent year over year, according to Verizon. The new leadership team heading Verizon Media in 2019 will help the carrier turn the unit's revenue trajectory around, Ellis said.

Telematics and IoT growth, on the other hand, performed well during the final quarter of 2018. The segment, which includes Verizon Connect revenues, were $242 million in fourth-quarter 2018, an increase of approximately 9.5 percent year over year, Ellis said.

Total operating revenue for Verizon's Wireless Division increased 2.7 percent in the fourth-quarter to $24.41 billion, up from $23.77 billion a year ago. The business unit climbed 4.8 percent for the year, rising from $87.51 billion in 2017 to $91.73 billion in 2018.

Overall, Verizon reported mixed financial results for the fourth quarter, which ended Dec. 31, 2018. The carrier posted operating revenue of $34.28 billion in the quarter, up about 1 percent from $33.96 billion in the fourth quarter of 2017.

Verizon's net income for the quarter was $2.07 billion, down about 89 percent from $18.78 billion during the same period last year. The carrier reported diluted earnings per share of 47 cents compared to diluted earnings per share of $4.56 during fourth quarter of 2017, which the carrier attributed to non-recurring events, including the impact of last year's revenue recognition standard

For the full year, Verizon posted revenues of $130.86 billion, up 3.8 percent from 2017's $126.03 billion. 2018's net income was $16.04 billion, down from $30.55 billion in 2017 which the carrier again said was due to the revenue recognition standard.