Verizon (NYSE:VZ) reported earnings today.
|Total Revenue Y/Y growth||+0.07%|
Even if numbers don’t look bad, it wasn’t enough to stop the stock from falling. VZ’s Consumer business reported higher churn. 189,000 wireless retail postpaid phone net losses in Q3.
There appears to be an intriguing trend at play. Earlier this year, Europe’s major telecommunications companies - Telefónica, Deutsche Telekom, and Orange - jointly released a statement urging social media and streaming services to contribute their fair share to the growing expenses of network infrastructure. This move was prompted by concerns that the ambitious goal of achieving widespread 5G connectivity in Europe could be jeopardized if internet service providers continued to shoulder these costs alone. Recent data from telcos reveals that Big Tech’s services now account for over 50% of all internet traffic, a 33% increase from pre-pandemic levels. In fact, streaming services like Netflix and YouTube alone make up nearly a quarter of the total network traffic in 2021.
McKinsey suggests that one of the primary reasons for the sluggish growth of the telecommunications industry is the commoditisation of its core business of providing connectivity, which has been dominated by other players in the digital industry. In a recent report, the firm noted that most of the industry’s value creation has been monopolized by “edge players,” such as app developers, handset manufacturers, infrastructure builders, and digital service providers. Consequently, the market capitalisation of the 25 largest telecom operators has decreased by 50% over the past decade, while social media companies have seen their value more than double within the same period.
This situation will not improve overnight and might have impact the the whole sectors in the near future including Verizon.