Verizon (NYSE: VZ) weathered a challenging 2020 with modest gains in its wireless business. The company is riding that positive trajectory for growth in 2021.
VZ in its Q420 earnings call reported consolidated service revenues of $110 billion, flat on a year-over-year basis. Overall revenues were down 3 percent, mainly due to slower wireless equipment sales related to the pandemic which led to store closings and lower take rates for new mobile devices.
Still the business throws off a lot of cash. Matthew Ellis, VZ CFO comments, “Capital spending in 2020 totaled $18.2 billion [up 2 percent YoY] as we continued to support traffic growth on our 4G LTE network while expanding the reach and capacity of our 5G Ultra Wideband network and launching our Nationwide 5G network. As a result, free cash flow for the year was $23.6 billion, up 32.4 percent YoY.”
VZ Wireless is the bright spot, accounting for $65.4 billion or 60 percent of the 2020 consolidated service revenues. That figure is up one percent YoY. Retail postpaid and prepaid connections grew by one percent for the year to an industry-leading 120.9 million.
VZ is pushing ahead with both its 5G deployments on several fronts and expanding its fiber footprint. The company has upped the ante for 2021, guiding to a 3 percent increase in wireless service revenues.
VZ is maintaining its consolidated capex guidance for 2021 flat with 2020, citing operating efficiencies that allow it to meet its construction objectives without raising spending levels.
Ellis explains, “Our consolidated capital spend for full year 2021 is expected to be between $17.5 billion and $18.5 billion, consistent with the prior year and within our normal capital intensity range. Our focus for the year includes further expansion of our 5G UWB network in new and existing markets, densification of our network to manage future traffic demands and continued deployment of our fiber infrastructure.”
While VZ does not break out capex allocations, it is maintaining a corporate-wide capital intensity (capex/service revenues) of 16-17 percent. Note that any level above 15 percent indicates expansion mode investments.
We estimate VZ Wireless’ 2020 capex at $10.4 billion, up 11 percent YoY. The company sustained an investment pace of $2.6-2.7 billion a quarter throughout 2020. VZ Wireless rode through a dip in Q2 capex and service revenues when the pandemic first hit and finished to end the year on a positive note.
Expect 2021 wireless capex in the $10-11 billion range. At that capex level, VZ has set some stretch goals for itself in 2021.
On the 5G front, VZ says that it now covers 230 million POPs in 2,700 cities with 5G Nationwide using dynamic spectrum sharing with its 4G LTE network.
For the first time, the company divulged that it now has 14,000 5G UWB small cells deployed, with a plan to increase that total to 30,000 by year-end 2021. In its just-announced long-term agreement with Crown Castle (NYSE: CCI), VZ is committing to lease 15,000 small cells from CCI over the next four years to support its 5G UWB and 5G Nationwide network builds.
In 2021, VZ will expand 5G UWB Mobility in 20 more markets cities bringing the total to over 80 cities. Furthermore, it will double 5G UWB Home deployments to more than 20 cities and will include its next generation subscriber units with those installations.
By the end of 2021, the company expects to have more than 20 public mobile edge computing centers up and running. Moreover, VZ is positioned to scale 5G and MEC in private network applications as demand dictates.
Hans Vestberg, VZ CEO, adds, “When it comes to the fiber question, yes, we continue to roll out fiber. … The vast majority of all the 5G sites have our own fiber. We are migrating our 4G sites, where it’s a good return on investment, to our own fiber. And over time, we will also open up opportunities for [fiber] resale to enterprise customers and wholesale. So, I think that we are seeing that benefit already on the 5G build because we are using our own fiber.”
By John Celentano, Inside Towers Business Editor
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