Verizon Withdraws Sales Guidance on COVID-19; AT&T Names New Chief
Verizon withdrew its full-year revenue outlook Friday due to COVID-19 uncertainty, as AT&T did Wednesday. But Verizon updated earnings, with mild reductions from earlier forecasts. As part of its annual shareholder meeting Friday, AT&T announced that CEO Randall Stephenson will be replaced in that role by President John Stankey on July 1. Stephenson will be executive chairman until January (see 2004240027).
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“We had a really solid quarter given the COVID-19,” Verizon CEO Hans Vestberg said on CNBC Friday. “We have to keep America connected. We’re not disconnecting any customers” affected by the pandemic, he said. “We have some customers in this moment who are unable to pay.” Everyone staying at home is affecting roaming revenue and device revenue is also down, he said.
Vestberg said on an investor call his company will know more about the effect of the pandemic over the next 90 days. It reported a $228 million charge to account for expected uncollectibles. Verizon closed 70% of its stores because of the virus; others are open limited hours. Vestberg said he has faced other crises but nothing like the pandemic. Most Verizon workers are at home, while frontline staffers “are playing a vital role to keep up the most important infrastructure in this country right now, besides hospitals and first responders,” he said.
The telco’s 5G and fiber plans are moving forward despite the pandemic, Vestberg said. The company is “finding new ways and innovative ways to actually do the deployment,” he said: “There are ways of dealing with approvals from the municipalities.”
Verizon will continue to assess the impact of COVID-19 on its business, “including our bad debt reserve and expect to provide an update on our next earnings call based on how things develop between now and then,” said Chief Financial Officer Matt Ellis.
Profit in Q1 was $4.3 billion, down 17 percent from a year ago. Revenue was $31.6 billion, down 1.6%. The carrier reported 239,000 net postpaid phone adds, but a loss of 5,000 broadband subscribers. Postpaid phone churn was 1.02%. Verizon cut its adjusted earnings per share outlook to between a growth of 2% and a fall of 2%, from expected growth of 2-4%.
“There is nothing about the coronavirus crisis that will actually help Verizon’s results,” MoffettNathanson’s Craig Moffett told investors: “Verizon is certainly much better insulated from the pressures of a recession than most businesses. But it would be foolish to suggest that Verizon will emerge unscathed.” T-Mobile now looks better positioned on 5G, Moffett said: “Verizon’s dense urban gathering places strategy for 5G will need to be revisited in the context of a world where dense urban gatherings are now all but unthinkable.”
Stankey's selection “completes the final phase of a succession planning process that AT&T's Board began in 2017,” AT&T said. Stankey, who joined AT&T in 1985, was CEO of WarnerMedia, chief strategy officer, chief technology officer, CEO-operations and CEO-business solutions, among other roles at AT&T. “We believe he brings the necessary skill-set to the company through the next chapter of its evolution,” Wells Fargo’s Jennifer Fritzsche said of Stankey: “He is a known quantity to Street.” Fritzsche said AT&T wouldn’t have “the scale, reach or platform it does today” without Stephenson and his predecessor, former CEO Ed Whitacre.
Shareholder Elliott Management has criticized AT&T management in the past. It "supports John Stankey as AT&T’s next CEO," a spokesperson emailed: "We have been engaged with the company throughout the search process, which was a robust one, including a range of highly qualified outside candidates and overseen by independent directors." The telco didn't comment on whether the investment firm was involved.
“Stephenson’s leadership of AT&T will deserve its own chapter,” in a history of this century's communications, said USTelecom President Jonathan Spalter. The association chief cited the executive's “bold vision for the future of telecom, broadband, entertainment and mobile technology.”