Verizon's FWA biz loses more steam

Verizon reported Q3 operating revenues of $33.82 billion (+1.5% YoY) and net income of $5.08 billion (+48.2%), leading to a 3.04% stock gain, despite a notable deceleration in fixed wireless access (FWA) subscriber growth to 261,000, which fell below analyst expectations and lagged competitors. New CEO Dan Schulman outlined strategic plans to rejuvenate FWA, expand fiber reach through new partnerships and the pending Frontier acquisition, and divest legacy assets, emphasizing a convergence strategy to enhance customer retention.

Analysis

Verizon reported Q3 operating revenues of $33.82 billion, marking a 1.5% year-over-year increase, while net income surged 48.2% to $5.08 billion, contributing to a 3.04% rise in its stock price. Despite these positive top-line results, Fixed Wireless Access (FWA) subscriber additions decelerated significantly to 261,000, falling short of analyst expectations of 281,000 and trailing competitors AT&T and T-Mobile. Residential FWA net adds were particularly weak at 121,000, representing the lowest result since the service's 2022 launch and the eighth consecutive quarter of year-over-year decline.

New CEO Dan Schulman has outlined a strategy to rejuvenate the FWA business, including the introduction of a less expensive "Lite" plan and a focus on avoiding promotional pricing to mitigate churn. The company's CFO, Tony Skiadas, reiterated a bullish stance on FWA, affirming its potential as a "long-term sustainable business." Schulman also emphasized expanding Verizon's fiber footprint through a new partnership with Eaton Fiber and the pending Frontier acquisition, which is on track for early 2026.

Verizon's convergence strategy, which combines home broadband and mobile services, is gaining traction, with 18% of its consumer post-paid mobile base now utilizing converged offerings, a 200 basis point increase year-over-year. This strategy is proving effective, as converged customers exhibit a 40% lower mobility churn rate compared to the overall mobility churn rate. Additionally, Schulman plans to aggressively sunset or exit legacy businesses, such as the aging copper network, to enhance profitable market leadership.

Key Decisions for Investors

• Investors should closely monitor Verizon's FWA subscriber growth trends in upcoming quarters, particularly the impact of the new "Lite" plan and the detailed strategy expected from CEO Schulman in January, as FWA deceleration remains a key concern despite overall positive earnings.
• Evaluate the long-term potential of Verizon's convergence strategy and fiber expansion initiatives, including the Eaton Fiber partnership and Frontier acquisition, given their stated benefits in customer retention and cross-selling opportunities.
• Assess the execution risks and potential financial implications of the planned divestiture of legacy assets, as this could streamline operations but also impact short-term revenue streams.