Editor’s note: Through its new Humanability campaign, launched in December 2017, Verizon is focused on expanding its reputation beyond being thought of primarily as a cellular phone carrier to a leading technology innovator that will help to alleviate challenges in realms including healthcare, urbanization and the environment. Technology Business Research takes a look. 

HAMPTON, N.H. – Strong iPhone sales and Verizon’s burgeoning IoT and media businesses drove the carrier’s 4Q17 year-to-year revenue growth as cited in its most recent earnings report.

Verizon’s (NYSE: VZ) consolidated revenue rose 5% year-to-year in 4Q17 to $34 billion, largely driven by the closing of the Yahoo acquisition. However, Verizon was still able to increase consolidated revenue on an organic basis (+0.6% YTY), excluding the impact of acquisitions made over the past year, due to higher wireless and Internet of Things (IoT) revenue in 4Q17.

Verizon’s wireless revenue growth was driven by equipment revenue increasing 12.9% year-to-year as well as 431,000 postpaid phone net additions, up significantly from 167,000 postpaid phone net additions garnered in 4Q16. TBR attributes Verizon’s improved postpaid subscriber additions and equipment revenue growth to the success of the carrier’s unlimited data plans as well as the atypical launch of the iPhone X in November, as new iPhone models are usually launched in September. Verizon’s wireless service revenue decreased 2.9% year-to-year due to lower average revenue per user (ARPU) stemming from nonsubsidized service plans, coupled with the loss of 184,000 prepaid subscribers in the quarter. However, Verizon has been able to increase service revenue sequentially for the past two consecutive quarters and expects to return to year-to-year service revenue growth in 2018 now that over 80% of its postpaid phone base is on unsubsidized service plans.

Verizon’s IoT revenue rose 7.8% year-to-year on an organic basis, excluding the impact of the recent Fleetmatics acquisition, as the carrier is attracting customers through the cost savings offered by its nationwide LTE Cat-M1 network as well as its growing portfolio of industry-specific solutions.

Through its new Humanability campaign, launched in December 2017, Verizon is focused on expanding its reputation beyond being thought of primarily as a cellular phone carrier to a leading technology innovator that will help to alleviate challenges in realms including healthcare, urbanization and the environment. The Humanability campaign will help to more effectively accentuate Verizon’s IoT capabilities in the 5G era as supporting advanced use cases in areas such as telematics, augmented reality and virtual reality, and smart cities will be paramount in attracting businesses and consumers.

Verizon’s Oath business increased media revenue by about 10% sequentially from 3Q17 to $2.2 billion due to increased customer advertising spending during the holiday season. Verizon seeks to increase traffic across its Oath properties by announcing new deals with the NFL and NBA that provide free and subscription-based access to live content via platforms including go90 and Yahoo Sports to viewers of any carrier. The initiatives will help Verizon bolster advertising revenue and capitalize on the growing trend of sports content being streamed on digital devices, particularly among millennials.

Competition between AT&T and Verizon will intensify in 2018 as the companies race to gain a time-to-market advantage in the 5G era

Verizon is aggressively investing in assets, including additional spectrum and fiber to support 5G during its infancy, and announced it will launch commercial 5G fixed wireless services in three to five U.S. markets in 2018, beginning in Sacramento, Calif. Offering 5G fixed wireless services will enable Verizon to expand broadband coverage outside of its existing Fios footprint, allowing the carrier to compete with ultrafast DOCSIS 3.1 services offered by cable companies while providing cost savings over traditional fiber deployments.

AT&T (NYSE: T) announced in January it expects to become the first U.S. carrier to offer mobile 5G by launching commercial services in a dozen markets by the end of 2018. AT&T’s announcement may cause Verizon to accelerate its commercial mobile 5G deployments, which were not initially expected to start until at least 2019, to keep in step with its rival. However, launching mobile 5G services prematurely will not benefit either carrier as 5G-compatible smartphones are not expected to become widely available until 2019.

Despite Verizon’s ambitions, ROI on 5G is uncertain as demand for the technology and its use cases have yet to be proved. Opportunity to monetize 5G will be limited initially as the technology will be a “nice to have” instead of a necessity for most customers. Additionally, IoT use cases that will require 5G connectivity, such as autonomous driving and advanced healthcare solutions, will not be prevalent for at least another several years.

(C) TBR