Communications Inc. on Friday unveiled a new cost-cutting plan after higher corporate costs and rising interest rates ate into its third-quarter profit.
The largest U.S. cellphone carrier in terms of subscribers reported a net gain of 8,000 phone connections under postpaid billing plans during the September quarter, a sign that recent rate increases had prompted many of its most reliable customers to leave the service.
Rival
AT&T Inc.
on Thursday reported a net gain of 708,000 such connections over the same period.
Shares fell 4.5% to $35.35 Friday. The stock has lost nearly a third of its value so far this year, compared with a 21% drop in the S&P 500 index.
Verizon executives nevertheless said that the price increases for certain cellphone plans were paying off, noting that overall wireless service revenue grew over the third quarter. Verizon and AT&T both raised fees for certain plans over the summer in response to rising costs for other consumer goods.
“We saw all the actions we took in the quarter having a positive impact,” Chief Executive
Hans Vestberg
said during a call with analysts. “That doesn’t mean we’re done. We think we can do more and we have more to do.”
Among those next steps was a new cost-cutting program that executives said will save $2 billion to $3 billion a year by 2025. The company didn’t detail how the initiative would trim expenses or how many, if any, jobs the move would affect.
Verizon’s overall net income, excluding profits from interests in noncontrolling entities, fell nearly 24% to $4.9 billion in the September quarter. Higher overhead costs and interest expenses contributed to the weaker earnings, though the company’s adjusted profit still topped Wall Street analysts’ expectations, according to data from
Overall revenue climbed 4% to $34.24 billion, surpassing analyst expectations of $33.76 billion. The increase included a 10% jump in wireless service revenue mostly driven by Verizon’s purchase of the TracFone prepaid wireless business.
Finance chief
Matt Ellis
said in an interview that the improving profitability in Verizon’s core wireless business showed that its strategy was pointing it in the right direction. Many subscribers were paying their bills on time and upgrading to more expensive plans over the past quarter despite signs of stress in the broader economy, he added.
“We can continue to bring customers in and step them up to grow revenue” with more full-featured plans, Mr. Ellis said. “If there’s opportunities to increase pricing, we obviously won’t be shy about doing that.”
Write to Drew FitzGerald at andrew.fitzgerald@wsj.com and Dean Seal at dean.seal@wsj.com
Write to Dean Seal at dean.seal@wsj.com
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2022-10-21 21:15:00