Verizon to focus on 5G delivery, let competitors hunt for content

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Verizon is bowing out of the battle for content it can distribute across its networks and, instead, betting on its promising 5G network itself, as the telecom giant’s path to success.

The nation’s largest wireless provider updated its 5G plan Tuesday, announcing Houston as the third of of four cities where the provider will launch 5G residential broadband service later this year. Verizon previously announced Sacramento and Los Angeles.

Verizon’s “fixed wireless” broadband solution, which promises speeds of up to 1 Gigabit per second, will be its first 5G service and will land first in those cities. Eventually, Verizon and other providers including AT&T, Sprint and T-Mobile plan super-responsive 5G service for smartphones, tablets and other net-connected devices, but that won’t likely become widespread until 2019.

Until recently, Verizon had been among telecom companies expected to compete for news, sports and entertainment content that could be distributed across its wireless and wired networks. Those competitors include AT&T, which is seeking to acquire Time Warner, and Comcast, already the owner of NBC Universal and until recently a bidder for a collection of Fox assets including its TV and movie studios.

Verizon did acquire AOL in 2015 and Yahoo, in a deal that closed last year. But Verizon executives suggested Tuesday the company would focus its efforts on the rollout of its 5G network. The company last month shuttered go90, a video service launched nearly three years ago provided free for Verizon wireless subscribers and stocked with free programming that targeted millennial viewers.

“We’re not going to be owning content or … competing with other content providers, we’re going to be their best partner from a distribution perspective,” said CEO Lowell McAdam during a call with investment analysts about Verizon’s second-quarter financials. “That makes great sense for the company going forward.”

The comments come as Verizon is reportedly in talks with Apple or Google to provide video content for its 5G service. Google’s YouTube TV or Apple TV could be chosen as a provider, Bloomberg reported Monday.

McAdam, 64, who joined Verizon Wireless in 2000 and was named CEO seven years ago, will retire on Aug. 1, with current chief technology officer Hans Vestberg set to become CEO.

McAdam said the company is poised for 5G leadership. “The first mover on network generation changes usually gains a significant amount of market share and with the assets that we have we think we are in that position with 5G,”  he said.

During the April-June period, Verizon added 531,000 wireless customers including 398,000 smartphones, compared to 614,000 in the April-to-June period a year ago. Verizon now has 116.5 million subscribers, up 1.7 percent from a year ago.

Overall, Verizon posted mixedsecond-quarter results. Net income of $4.26 billion declined 5.2 percent compared to the same period last year and fell short of expectations of $4.7 billion, based on analysts polled by S&P Global Market Intelligence.

Adjusted earnings of $1.20, which surpassed expectations of $1.15, took into account $900 million in charges relating in part to the discontinuation of go90, as well as acquisition costs pertaining to Oath, Verizon’s umbrella company for AOL and Yahoo.

Revenue rose 5.4 percent to $32.2 billion, surpassing expectations of $31.8 billion. 

Verizon saw its revenue from wireless customers increase 5 percent to $22.4 billion during the second quarter. But revenue from its wireline services, including Fios video and broadband service, slipped 3.4 percent to $7.5 billion.

Verizon added a net 43,000 Fios Internet subscribers, an increase of about 4 percent, but lost 37,000 Fios video subscriptions.

Verizon (VZ) shares rose more than 2 percent in premarket trading Tuesday to $51.80 and were up 0.5 percent later in the day. Shares have been down about 5 percent so far this year, while the S&P 500 Index has risen about 4 percent.

Vestberg, 52, who joined Verizon last year after six years as president and CEO of Ericsson, echoed the outgoing McAdam. “We’re going to have the best network … and of course, we can attract partners that we can work with. That is the model that we have and we can continue to develop.”

That message was a positive one, said Craig Moffett, partner and senior analyst at research firm MoffettNathanson. “For all the world, it looks like Verizon’s strategy really is to be a best-in-class wireless operator,” he said in a note to investors Tuesday, in which he gave Verizon a Buy and target price of $56. “Today’s strong results suggest that sticking to wireless might not be a bad idea.”

More: The U.S. just took a key step to making 5G smartphones a reality

More: 5G speed phones: We now know when they’re coming, and where

Follow USA TODAY reporter Mike Snider on Twitter: @MikeSnider.

 

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