Verizon Communications (VZ) states that its revenue growth will reach 4% or more in 2024, as 5G wireless services increase. But Verizon’s stock fell on Thursday as analysts debated telecom’s $ 53 billion investment in 5G wireless spectrum and additional network spending.
On a virtual investor day after the market closed on Wednesday, Verizon said it expects revenue to grow 2% in 2021, in line with previous projections. This will increase to a 3% growth in 2022 and 2023, the company said. In 2024, Verizon expects revenue growth of 4% or more.
In addition, Verizon told analysts that it plans to use the 5G mid-band spectrum to provide fixed broadband services for homes. Cable TV companies currently dominate residential broadband.
“Verizon articulated for the first time some of the benefits for the spectrum businesses and network and spending initiatives, placing a stake in the field for growth of more than 3% in 2022 and 2023, and 4% in addition”, Raymond O James analyst Frank Louthan said in a note to customers.
But telecom also said it expects to spend an extra $ 10 billion on building 5G wireless network infrastructure over the next three years – or about $ 3.3 billion a year. This is in addition to the $ 18 billion or more each year that it already spends on maintaining its entire network, part of which is already earmarked for 5G.
“The general question is whether investors will place a higher multiple on Verizon’s shares before the clear test points for potential revenue acceleration in future years, balanced against minimal (profit) growth during this investment phase and capital returns limited to the dividend for the next 4 to 5 years, “said Credit Suisse analyst Douglas Mitchelson in his report to clients.
Verizon Stock: 5G Wireless to increase revenue
Construction money comes on top of the nearly $ 53 billion that Verizon recently spent on the government’s auction of “C-band” radio waves. It paid an average of 161 MHz on the US spectrum, as well as incentive payments to satellite operators and compensation costs.
Verizon said it expects new revenue to come from corporate 5G services, including private networks and cutting-edge mobile computing. In addition, Verizon said that 5G mobile services will result in more consumers upgrading to unlimited monthly data plans.
In the tests, Verizon used high frequency waves for fixed broadband for homes. The middle band spectrum can provide higher quality services, analysts say. Telecom expects its fixed broadband service to reach 30 million households by the end of 2023.
Verizon’s shares fell 1.6% to 56.18 in the morning stock market today. Verizon’s shares trade well below a 62.32 entry point.
Currently, 61% of consumer subscribers have unlimited data plans, compared to 40% in 2018.
T-Mobile leads the middle band spectrum
T-Mobile US. (TMUS) leads Verizon and ATT (T) in the construction of 5G services using mid-band spectrum. T-Mobile holds an investor day on Thursday.
T-Mobile says its 5G mobile network using mid-band spectrum now reaches 125 million people.
Verizon plans to reach 175 million by the end of 2022. AT&T hosts an investor day on Friday.
A component of Dow, Verizon’s stock pays a 4.6% dividend.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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