VERIZON - Stocks

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The seamless flow of information and ease of communication we see today is all because of the advancement in the telecommunication sector. Many of the other business sectors would not even function properly if not for telecommunication, which is also the backbone of personal and professional communication.

The tasks of making telephone calls, short messages, and web surfing that people all around the world perform is only because of telecommunications. The rapid advancement we see in the form of artificial intelligence, cloud computing, and machine learning is all related to progress in the telecommunication industry. Telecom services are essential to streamline businesses and improve productivity.

Verizon Communications is an American technology conglomerate that provides a wide range of innovative and advanced digital products and services to customers all across the world. Verizon focuses its business in telecommunication and in developing and delivering internet, data, and wireless services. Verizon also provides network systems and solutions for big organizations and government-operated businesses. The word ‘Verizon’ is a combination of two words, which are ‘Veritas,’ a French word meaning truth, and ‘Horizon.’

Verizon is headquartered in Midtown Manhattan, New York, and the company has 135,000 employees. The business motto of Verizon is ‘transforming how people, businesses, and things connect.’ Verizon offers telecom, network security, managed network, and IT services across 150 countries of the world, but the focus of most business is in the US. Verizon Wireless is a subsidiary of Verizon and the second-largest wireless services provider in the US after AT&T, based on total revenue.

Verizon is a global brand in the telecom sector and has almost 6 million broadband connections, nearly 95 million retail connections, and 4 million Fios video connections. Verizon also distributes wireless-enabled smart devices that include smartphones, laptops, tablets, and other wearable devices.

Verizon recently expanded its services by acquiring the popular assets of AOL and Yahoo. Verizon is one of the only telecommunication providers that is listed on both the New York Stock Exchange (NYSE) and NASDAQ. In 2019, Verizon was named ‘Best Company for Multicultural Women,’ and it also featured on the ‘Best for Vets Employers List’ in 2019.

History of Verizon Communications

Verizon Communications dates back to the formation of Bell Telephone Company in 1877. The company was initially incorporated in 1885 under the name of American Telephone and Telegraph Company (AT&T). The brand name ‘AT&T’ remained until 1983, after which the company was divided into 7 smaller regional companies in 1984 due to the US Department of Justice that authorized AT&T to breakdown Bell System into 7 divisions.

One of the divisions ‘Bell Atlantic’ merged with General Telephone and Electronics Company (GTE) and formed into Verizon Communication in 2000. Verizon was initially formed on October 7, 1983, and it was incorporated in Delaware. Bell Atlantic Corporation was formed due to the division of the Bell System. The original list of companies working under Bell Atlantic were

• Bell Telephone Company of Pennsylvania
• C&P Telephone
• New Jersey Bell; and
• Diamond State Telephone

Bell Atlantic worked in numerous states of the US that were Delaware, New Jersey, Virginia, Washington D.C, West Virginia, and Pennsylvania. In 1996, Chairman Raymond Smith put forward the merger of Bell Atlantic with NYNEX, and the headquarters were moved from Philadelphia to New York.

Bell Atlantic’s name was changed to Verizon Communications in June 2000 when Federal Communications Commission approved the merger of Bell Atlantic with GTE for a deal valued at $64.7 billion. The merger made Verizon the second largest local telephone operator in the US, with over 63 million telephone lines in 40 states. The merger also provided Verizon with 25 million users.

Since 2000, Verizon has been quite active in business and involved in numerous mergers, acquisitions, strategic alliances, and divestments, which includes Yahoo, AOL, XO Communications, Fleetmatics, and Intel Media assets.

In 2002, Verizon introduced the 3G technology that increased the internet speed to 144 kb (Kilobyte). In August 2002, Verizon started offering mobile calls, internet service, local and long-distance calling for users in New York and Massachusetts, in a ‘Bundle.’ In April 2004, Verizon replaced rival AT&T in Dow Jones Industrial Average. Also, in 2004, Verizon launched ‘Fios’ internet service that transmitted voice and data over fiber optic cables in Texas.

The Fios TV services were launched in September 2005. The Fios TV offered nearly 350 media channels in 8 states of the US along with a Video on Demand option. In March 2005, Verizon acquired MCI Communications for a deal worth $8.5 billion; the deal allowed Verizon access to not only global markets but also MCI’s one million corporate clients. Due to the acquisition, Verizon’s revenues increased by 20%.

In May 2007, Verizon purchased Cybertrust, which was a private company that provided information security services. In June 2008, Verizon Wireless acquired Alltel for $28.1 billion; the purchase allowed Verizon to cross AT&T in the total number of customers and have an opportunity to reach rural areas. In December 2010, Verizon introduced 4G LTE services in 38 locations and 7 airports.

In January 2011, Verizon bought an IT firm ‘Terremark’ for a deal worth $1.4 billion. In June 2012, Verizon purchased Telematics for $612 million; the company developed wireless features for vehicles. To develop its IoT division, Verizon acquired the popular American Web portal ‘AOL’ in 2015 for $4.4 billion. Verizon acquired a startup tech firm called Sensity in September 2016.

In June 2017, Verizon acquired Yahoo for a deal valued at $4.48 billion. In 2018, Verizon Connect was established due to the merger of different units that included Fleetmatics, Telematics, and Telogis. Verizon invested almost $11 million in Wireless network with a focus on 4G and 5G technology.

In 2018, Verizon became the first company to launch 5G service and also the world’s first 5G data transmission over a smartphone. In April 2019, Verizon started offering 5G Ultra-Wideband Network service in few cities at first, which included Houston, Los Angeles, Indianapolis, and Sacramento, and by the end of the year, 5G service was available in almost 30 cities.

Current Business and Investment of Verizon Communications

Verizon Communications is one of the leading technology company that is engaged in providing both wireline and wireless voice, data, and internet services to ordinary consumers and business clients. Verizon is also engaged in developing and supplying network services, payphones, telecommunication equipment, and data services to government entities.

Verizon is the largest provider of wireless services in the US and also provides wired services to people residing in the North East. Verizon is dominant in the US as compared to its rival AT&T, and Verizon gets almost 85% of earnings from its wireless services. Verizon operates in two segments called Verizon Consumer Group and Verizon Business Group; the Verizon Consumer division consists of Wireline and Wireless segments.

• Wireline unit includes the provision of local telephone, voice, data, and video services through broadband, data centers, managed network services, cloud services, and local and long-distance voice services. The wireline services are provided across the North-Eastern states of the US and also across the Mid-Atlantic. The wireline services are transmitted through a 100% fiber-optic network by ‘Fios’ brand and the traditional copper wire network.
• The wireless division is involved in providing wireless voice, data, and internet services to all kinds of consumers. The wireless services are provided under the ‘Verizon’ brand and across large wireless networks in the US. The wireless services include 4G and 5G development and implementation.

The Business Segment of Verizon provides both wireless and wireline products and services such as networking solutions, video and data services, Internet of Things (IoT), and security and managed network services to corporate clients and businesses.

Verizon merged Yahoo Inc.'s operating assets with its AOL business to form a new business unit called ‘Oath Inc.,’ which includes almost 50 technology and media brands. The OATH unit comprises of Yahoo Sports, Tumblr, AOL.com, Yahoo Finance, MAKERS, HuffPost, and Yahoo Mail.

The Managed Security segment is focused on the development and provision of digital security to improve cybersecurity and prevent cyber-attacks. Verizon also manages the ‘Innovation Program’ that emphasizes on developing ‘alternative methods for integrating wireless technology.’

Risk and Potential in Verizon Communications Environment

Verizon Communications posted revenue of $131.86 billion. The operating income of Verizon Communications in 2019 was $30.38 billion, net income of $19.79 billion, and total assets were 291.73 billion. Verizon is a big name in the telecom industry in the US and most parts of the world. SWOT Analysis is a necessary management tool that allows business companies to benchmark their performance and compare it with industry standards. SWOT analysis of Verizon is given by

• Strengths

Verizon is one of the leading telecom companies and has one of the largest wireless networks in the US. The company has a strong telephone and internet infrastructure and has over 100 million wireless subscribers. Verizon offers a diverse range of services such as mobile telephony, fixed-line, broadband internet services, digital television, and network solutions. Verizon’s services are spread across 150 countries. Verizon has achieved tremendous success in 4G LTE and 5G network development and implementation. The company has a substantial market share, a large user base that provides financial strength and sustainability.

• Weaknesses

Verizon is heavily dependent on revenue generation from the US market. The company is often criticized for offering expensive rates and packages as compared to rival telecom companies that offer better subscription plans. The telecom industry is getting saturated, and Verizon must diversify its segments and focus more on Research and Development (R&D).

• Opportunities

Verizon has a fantastic opportunity to expand to emerging markets where there is a growing population in need of better mobile and internet service. The company can do pertinent partnerships and acquisitions to diversify its business offerings. Verizon can innovate VOIP based services along with seamless audio and video services.

• Threats

Verizon faces a tough challenge from other tech companies, which include AT&T, China Mobile Ltd, Sprint Nextel, and Nippon Telegraph & Telephone Company. The company has to comply with changing FCC (Federal Communications Commission) regulations and government policies. Economic recessions and inflation also influence Verizon’s business.

Stock Analysis of Verizon Communications

Verizon Communications is listed and actively trades on the New York Stock Exchange (NYSE) with the ticker symbols ‘VZ.’ The company is listed under the ‘Communications’ Sector, and the industry is ‘Major Telecommunications.’ Verizon is also a member of other indices such as the Dow Jones Industrial Average (DJIA), the S&P-100 Index, and the S&P-500 Index.

The all-time high share price of Verizon was $69.50 on October 4, 1999, and the average price in the last 52 weeks is $57.96.

The Coronavirus pandemic has affected most of the businesses, but Verizon performed relatively better than expected in the second quarter for 2020. The wireless segment of Verizon did better, but revenue dropped 5% to $30.4 billion, and adjusted Earnings per Share (EPS) was $1.18. The analysts predicted revenue to be $29.84 billion and EPS to be $1.15 per share. Analysts also said Verizon was lost nearly 100,000 wireless phone subscribers, but the company added 173,000 subscribers. Earlier in 2020, Verizon added almost 245,000 postpaid wireless phone customers.

However, Verizon Media sales fell significantly by 24% to $1.4 billion. The key to success for Verizon lies in its development and implementation of 5G services, which will have a vital role in other sectors of the market, such as cloud computing, autonomous vehicles, manufacturing automation, and remote healthcare services.

According to estimates, 5G technology would account for $12.3 trillion of the global economy and support over 20 million jobs, but it will take years to develop as progress has slowed due to the Covid-19 outbreak. Verizon is expected to launch 5G Ultra-Wideband in nearly 60 cities and before the launch of Apple 5G enabled iPhones.

Verizon is looking to grow and expand amidst the Coronavirus pandemic, and the company acquired Blue Jeans Network in April 2020, which is a company providing cloud-based services to small and large business organizations. Verizon is said to integrate Blue Jeans Network with its 5G product line up that can help to diversify the reach and potential of 5G capabilities. Amid the lockdown caused by the Covid-19 outbreak, the tendency of mobile gaming, social interactions, video streaming has increased considerably that is allowing Verizon to increase its sales and revenues.

The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.