A SWOT Analysis of Verizon Telecom
2016 was another year of profits for Verizon. It was another year that Verizon showed strong operational and financial performance. The superiority of Verizon’s network and performance was also confirmed by third party surveys. ‘Rootmetrics’ confirmed that Verizon was the number one network provider in US. 2016 proved to be a period of strong growth in the 4G LTE wireless network usage. Growth in this area was driven by the increased demand for the mobile video.
The company has seen its customer base grow. However, amid all this, the brand has retained its focus on quality and customer satisfaction. It has also showed great progress in generating new sources of revenue in 2016. Currently, it is investing in 5G to remain ahead of other providers in this race too. Internet of Things and telematics have also proved to be areas of impressive growth for the telecom company. Here is a SWOT analysis of Verizon discussing its strengths, weaknesses, opportunities and threats.
CEO: Lowell C McAdam
Competitors: At & T, Sprint, T Mobile.
Strengths:
- Rated best wireless network in US
Year by year Verizon has been rated the best wireless network in US. For the seventh consecutive time it has been ranked the number one in US. Rootmetrics again ranked it number one in all the six categories including overall performance, network reliability, network speed, data performance, call performance and text performance. Verizon is the leader in wireless and fibre networks.
- Large base of loyal customers
Verizon’s base of loyal high quality customers has kept growing and is bound to grow further from the new sources. The technological advances and demand for connected solutions has kept growing which has brought new opportunities for Verizon.
- Great financial and operational performance
Its financial performance has been impressive. Some of the key highlights for 2016 are as follows:
| $3.21 reported earnings per share |
| $3.87 adjusted earnings per share (non-GAAP) |
| $126.0 billion in consolidated revenues |
| $22.7 billion in cash flow from operations |
| 10th consecutive year of annual dividend increases |
| 114.2 million wireless retail connections |
| 1.01% wireless retail postpaid churn |
| $89.2 billion in wireless revenues |
| 92.5 million retail postpaid 4G LTE connections |
| 5.7 million Fios Internet subscribers |
| 4.7 million Fios Video subscribers |
| 4.6% growth in Fios revenues |
- Impressive growth in wireline business
Verizon has also seen impressive growth in its wireline business. The year ended with 5.7 million Fios Internet and 4.7 million Fios Video customers. Verizon has continued to penetrate the big urban markets like Boston, New York and Philadelphia. Fios revenue growth has also remained strong.
- Extraordinary growth in 4G LTE network
2016 was a period of extraordinary growth in 4G LTE usage for Verizon. The increased demand for mobile video has been particularly driving this growth. The usage were up 47 percent year on year in 2016.
- Industry leader in 5G networks
Verizon is leading the way in the introduction of the 5G networks along with the plethora of services that the 5G LTE network will enable. 5G is going to be the next big thing in telecom because of speed it provides. Several new technologies will need better connectivity and speed which can only be matched by 5G’s capabilities. It can provide speeds more than 1 gigabytes per second. In both fixed broadband and Internet of Things, 5G will bring new market opportunities for the brand.
Weaknesses:
- Better plans from the competitors leading to customer base erosion
During the third quarter of 2016 Verizon’s revenue from the wireless unit dropped 4%. The reason was that its competitors Sprint and T-Mobile despite being the smaller carriers introduced new free unlimited plans that took away 36000 of its post paid subscribers.
- Weaker position against China Mobile
On the international level, the performance of Verizon is still secondary to China Mobile based on the number of subscribers. Moreover, Verizon does not have an impressive international presence like many other big brands like Vodafone whose presence is more evenly distributed throughout the world.
Opportunities:
- Growth of 5g LTE
5G is going to bring a sea of opportunities as a large ecosystem of services will depend on it. S. In 2016, Verizon conducted successful technical trials of 5G infrastructure and will follow up in 2017 with precommercial pilots in 11 markets around the country in preparation for introducing fixed wireless service. This will provide Verizon with the crucial first mover advantage in the new markets.
- Internet of things
Internet of Things is also going to open a new world of opportunities for the brand. Verizon has not only become a big force in the Internet of Things but also developed its telematics capabilities greatly. “IoT is a fast-growing area for Verizon; in the fourth quarter, organic revenue growth from its IoT businesses was 21 percent year over year, with annualized revenues approaching $1 billion”. It has invested in telematics to make the best of the available opportunities.
- Expanding internationally
International expansion can bring great opportunities for Verizon. Moreover, the Asian markets are growing fast and Verizon must focus on this market like Vodafone if it wants to grow faster. Its IoT platform Thing Space supports more than 13000 developers that are embedding mobility into as wide range of products that will connect to its 4G LTE network.
- Attracting the millennial customers
Most of Verizon’s opportunities lie with the millennial customers. By 2020 it is expected that this generation will constitute 60% of its customers.
Threats:
- Increased competition from US based brands
Competition from the US based brands like AT &T, T mobile, and Sprint has kept increasing. From time to time these brands release new products and offers to snatch customers away from Verizon. Premium pricing of Verizon becomes a trouble in such cases.
- Regulatory and legal pressures
The regulatory and legal pressures on the telecom industry have kept increasing with time. Moreover, security and privacy related laws have been made stricter since the terrorist attacks.
- Costs of maintenance and expansion
Maintaining such a huge infrastructure requires a big investment. Apart from it the cost of skilled human resources is also a big cost because maintaining a staff of 177,900 is not an easy task. If Verizon plans to increase its global presence, that too will invite major costs.
Sources
https://fortune.com/2016/10/20/wireless-competition-hits-verizon-and-why-its-not-going-away/