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Verizon Q3 solid as 5G ramps, but Oath is becoming a drag

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Verizon’s third quarter was better-than-expected as the company said its 5G rollout is on schedule. However, Verizon is managing an underperforming Oath media unit, video FiOS defections and intense wireless competition.

The telecom giant reported third quarter earnings of $1.19 a share and $1.22 a share on a non-GAAP basis. Revenue from the third quarter checked in at $32.6 billion, up 2.8 percent from a year ago. Verizon said it added 515,000 retail postpaid net additions and had a 0.80 customer churn.

Wall Street was looking for earnings of $1.19 a share on revenue of $31.72 billion.

Verizon’s results were interesting since the company is prepping for 5G and value added services for consumers and enterprises yet trying to navigate the company’s acquisitions of AOL and Yahoo. CEO Hans Vestberg said the company is “investing in networks” and “best positioned to take full advantage” of 5G.

Also: Ericsson: 5G a ‘commercial reality’ as networks sales rise | Edge Computing: The 2 things tech leaders should know

CFO Matt Ellis said on a conference call:

At Verizon, we believe that true 5G requires an ultra-wideband solution utilizing millimeterwave spectrum to address the full array of use cases that 5G enables. Our network preparation for nationwide 5G deployment requires deep fiber resources, a vast array of small cells, critical spectrum holdings, and mobile edge computing capabilities, all of which we have been assembling for years.

The telecom giant is in a race to build out its 5G network as T-Mobile, Sprint and AT&T have similar plans. Verizon’s launch of 5G Home, which runs on proprietary standards for now, has started installs and Ellis said the company will learn and iterate as 5G Home rolls out.

I will add that we started doing installs earlier this month. And we’ve seen performance as we’ve expected since we started doing those installs. The technology works, our customers are getting the experience they expected, and we are getting a lot of good learning which will benefit us next year when we roll out the product to that much larger audience.

5G Home will become more significant as we expand coverage and we get on the global standards equipment in 2019. And I would expect that that would start to have an impact on consolidated revenues as we get into 2020 and beyond.

Here’s a look at the moving parts.

The good

  • Wireless revenue was $23 billion, up 6.5 percent from a year ago. Service revenue was up 0.8 percent from a year ago. Customers are upgrading to higher access plans and adding connections.
  • Verizon added 515,000 retail postpaid net additions in the third quarter. Verizon added 510,000 smartphone adds, lost 80,000 tablets and added 300,000 other connected devices such as wearables.
verizon-q3-2018-metrics.png
  • Verizon’s telematics business, known as Verizon Connect, had revenue of $241 million in the third quarter with IoT revenue up 12 percent. Verizon’s telematics unit is now on an almost $1 billion annual revenue run rate.
  • The company is on track to save $10 billion by 2021.
  • Verizon rolled out 5G Home, deployed more fiber and is positioning for more 5G services. Year-to-date capital spending was $12 billion.
  • FiOS revenue for the third quarter was $3 billion, up 1.6 percent from a year ago. FiOS Internet connections saw 54,000 net adds in the third quarter.

Also see: What is 5G? Everything you need to know about the new wireless revolution | 5G technology: A business leader’s guide (Tech Pro Research) | All 5G stories | CNET: 5G is almost a reality. Here’s what it’ll really feel like

The bad

  • Oath revenue in the third quarter was $1.8 billion, down 6.9 percent from a year ago. Verizon said: “The company expects Oath revenues to be relatively flat in the near term and does not expect to meet the previous target of $10 billion in Oath revenues by 2020.”

Ellis noted that Oath business is tied to desktop and search and that’s a challenge for the business. He added:

The leadership team at Oath is focused on returning to revenue growth by completing the integration of the legacy AOL and Yahoo advertising platforms by year-end, implementing initiatives to realize synergies across all of our media assets, and building services around our core content pillars of sports, news, finance, and entertainment. Additionally, we are utilizing Oath’s technical capabilities, such as artificial intelligence, augmented reality, and virtual reality across all of Verizon.

  • Verizon lost 63,000 FiOS Video connections.
  • Wireline had an operating loss of $50 million.

As for the outlook, Verizon said it will post revenue growth in the low- to mid-single digits on a percentage basis. The company also projected capital spending to be between $16.6 billion to $17 billion for 2018. That cap-ex guidance was lower than expected. Ellis said:

We are seeing the benefits of some changes in how we run that organization, using new capacity utilization models, changes to our inventory management systems, adoption of procurement analytical tools, and a whole host of other things.

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BMW iX5 Hydrogen Production Starts, But Don’t Expect To See This Fuel-Cell SUV In Dealerships

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The reality, though, is that even with a small number of BMW iX5 Hydrogen SUVs being produced — using individual fuel-cells supplied by Toyota, but assembled into a stack by BMW using the automaker’s own processes and technologies — the expectation is that hydrogen as a fuel will be predominantly of interest to non-passenger vehicles. Instead, it arguably makes the most sense, BMW suggests, for larger vehicles like medium- to heavy-duty trucks, along with the marine and aviation sectors. We’ve already seen Toyota reveal its plans for such an FCEV truck.

Despite that, and an acknowledgment that battery-electric vehicles will undoubtedly lead in the mainstream, BMW still believes there’s a place for FCEVs. After all, the automaker argues, if the infrastructure is being built to cater for trucks, there’s no reason not to also use it for passenger vehicles like the iX5 Hydrogen.

The results of the small-series production beginning today will be used as technology demonstrators across select regions from spring 2023, BMW says. It’s unclear at this point how many will be built. Depending on the reception and the strengths of the technology, series production of a first model could follow mid-decade, ahead of a potential full portfolio of BMW FCEVs from the 2030s onwards.

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Tesla Set To Deliver The First Semi To Pepsi

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In October, Tesla’s CEO revealed that the production of the Tesla Semi had begun, and it was bound to be delivered today. Tesla has already started the countdown, and we expect the unveiling event to go down at the Nevada factory. The electric truck will be dispatched to Pepsi, which had ordered 100 units. Investor reports that Tesla’s stock price increased by 7.7% on Wednesday, probably in anticipation of Tesla’s Semi first delivery.

Musk tweeted on Saturday that the “Tesla team just completed a 500-mile drive with a Tesla Semi weighing in at 81,000 lbs!” However, considering that Musk said that the company is dealing with supply chain issues and market inflation, it’s unclear if Tesla will stick to the original $180,000 price it intended to sell at when it was announced in 2017. Then again, Tesla offers a cheaper Semi that will be available for about $150,000 — but it can only achieve up to 300 miles at full load capacity. For now, we can only wait until it’s on the road to confirm if the specs match up to what was promised five years ago.  

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Coinbase Joins Elon Musk In Slamming The Apple App Store Tax

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Coinbase complained that Apple’s insistence on its cut unreasonably interfered with its business.

Coinbase’s argument was largely the same as Elon Musk’s, and the basis of Epic Games’ aforementioned lawsuit. According to all of the above, Apple was half of a duopoly: with Google, it controlled the global app marketplace. The “duopoly” part of the argument is pretty much incontrovertible: As of October 2022, both Apple and Google control 99.43% of the global smartphone market between them (via StatCounter). Both get a 30% cut of everyone’s action on its marketplace. From the perspective of Coinbase, that took too much money out of too many elements of its business.

Epic sued over that and, as noted above, won with an asterisk. Apple had restricted in-app purchases, and courts found that anticompetitive, but did require that Apple get a 30% cut of the profits, even though they took place in someone else’s app. In short, according to the Verge, the court said that if you’ve found a way to make money using iOS, you owe Apple 30%, period.

Epic thought in-app purchases should be exempted from the tax. Coinbase thinks elements of the NFT development process — in this case, gas prices to run the processing equipment necessary to mint NFTs — should be exempt from Apple’s app tax. Apple treats all user expenses on an app as in-app purchases and, per the Epic court decision, in-app purchases mean Apple gets a cut.

It’s not a simple problem, and it’s not likely to be solved anytime soon. Stakeholders and regulators have barely begun to integrate cryptocurrency and NFTs into the conventional marketplace. Who gets paid for what is likely to be a conversation for years on end. For now, all that’s certain is that conversation has begun.

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