(Bloomberg Businessweek) -- No matter what Verizon Communications Inc. does, the only response it seems to elicit is more yawns. But investors might want to pay better attention.
This week, the carrier kicked off the industry's earnings season with another solid quarter of results, including the addition of 603,000 retail wireless customers. That brings Verizon's total to above 115 million, likely extending its lead over AT&T Inc., T-Mobile US Inc. and Sprint Corp., which will release their own figures in the coming weeks.
Sure, Verizon had to cave and offer competitive unlimited-data packages to be able to bring in so many new customers. But it helps being the best and most profitable network -- it means Verizon can afford to give a little to protect its base.
For all that, there wasn't much of a stock reaction, and over the next year analysts see the shares doing very little. Their highest and lowest price forecasts could almost pass as resistance and support bands for the previous five-year period:
But while investors are unimpressed, behind the scenes Verizon is investing in its network in preparation for the eventual launch of 5G, the ultra-fast next generation of wireless service that will enable not just more mobile binge-watching, but also purposeful advances like driverless cars. Verizon's currently one of, if not the, best positioned for this with its acquisitions of spectrum-holder Straight Path and fiber-optic networks from XO Communications, from which it's also leasing some spectrum.
"I don't think you're going to recognize the business five years from now versus where it is today," Matthew Ellis, Verizon's newly promoted chief financial officer, said on this week's conference call in reference to 5G and Oath, the nondescript name for its new advertising division that houses AOL and Yahoo. To shareholders, 5G still feels too far away to get excited about, while the Oath strategy remains somewhat nebulous to a wireless investor community that remembers AOL and Yahoo for "You've Got Mail" and a Google wannabe. But Oath did deliver $2 billion of revenue during the quarter, which accounts for about 6 percent of Verizon's top line.
When it comes to TV streaming, Verizon is playing catch-up as AT&T's DirecTV Now service continues to grow rapidly and Dish Network Corp.'s SlingTV remains the large, if threatened, incumbent. Verizon is aiming for a spring 2018 launch of its service, but the date could be pushed back still, according to a Bloomberg News report this week.
Even with Verizon's missteps, its outlook is clearer than that of its rivals and it has the potential for more positive surprises in the coming year than any of them. AT&T is going to have its hands full trying to integrate the $109 billion acquisition of Time Warner Inc. and carefully managing its cash priorities. Sprint and T-Mobile, meanwhile, are just weeks away from announcing their merger, and the regulatory hurdles looks so large that many investors are already dubious (I do think there are compelling reasons to approve the transaction). Without the deal, T-Mobile and Sprint will have trouble maintaining momentum.
Verizon has backpedaled on talk of it exploring a cable or media mega-merger -- mostly because it has its own debt burden and the math hasn't quite worked out. But in this environment and as AT&T begins to reap the benefits of owning HBO and other TV networks, it's possible the door is still open for a Verizon deal. Even if it's not, Verizon's stock may not induce yawns for long.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
To contact the author of this story: Tara Lachapelle in New York at tlachapelle@bloomberg.net.
To contact the editor responsible for this story: Beth Williams at bewilliams@bloomberg.net.
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