Verizon Communications (VZ) says its revenue growth will reach 4% or more in 2024 if it scales up 5G wireless services. Verizon’s inventory declined on Thursday as analysts discussed the $ 53 billion investment in 5G wireless spectrum and additional network spending.
On a virtual investor day after the market closed Wednesday, Verizon said it expects revenue to grow by 2% in 2021, in line with previous guidance. It will increase to 3% growth in 2022 and 2023, the company said. By 2024, Verizon has forecast 4% or more revenue growth.
Verizon also told analysts that they plan to use the 5G mid-range spectrum to deliver fixed broadband services to homes. Cable TV companies currently dominate in residential broadband.
“For the first time, Verizon has expressed part of the business’s benefit from the spectrum and networking initiatives and spending, putting a stake in the ground for more than 3% growth in 2022 and 2023, and 4% beyond that, “Raymond said. James Lankan analyst Frank Louthan said in a note to clients.
But telecommunications has also said it will spend an extra $ 10 billion over the next three years on building 5G wireless network infrastructure – or about $ 3.3 billion a year. In addition, it spends $ 18 billion annually to maintain its entire network, some of which is already destined for 5G.
The overarching question is whether investors will place a higher multiple on Verizon stock before clear evidence points for potential income acceleration in the coming years, balanced against minimal (earnings) growth during this investment phase and capital returns limited to the dividend for the next 4 to 5 year, ”Douglas Mitchelson, an analyst at Credit Suisse, told clients in his report.
Verizon Stock: 5G Wireless to Increase Revenue
The buildup money comes in addition to the nearly $ 53 billion that Verizon recently spent on the government auction of “C-band” waves. It pays an average of 161 MHz US spectrum, as well as incentive payments to satellite operators and cleaning costs.
Verizon said it expects new revenue to come from 5G enterprise services, including private networks and mobile peripherals. Verizon also said that 5G mobile services will result in more consumers upgrading to unlimited monthly data plans.
In trials, Verizon used high-frequency airwaves for fixed broadband to homes. Analysts say that mid-range spectrum can provide a higher quality service. The telecommunications company expects its fixed broadband service to reach 30 million homes by the end of 2023.
Verizon shares fell 2.8% to 55.51 on the stock market to date. Verizon shares are trading well below an entry point of 62.32.
Currently, 61% of consumer subscribers have unlimited data plans, up from 40% in 2018.
T-Mobile leads in mid-range spectrum
T-Mobile USA. (TMUS) leads Verizon and AT&T (T) in the expansion of 5G services using mid-band spectrum. T-Mobile is holding an investor day on Thursday.
T-Mobile says its 5G mobile network that uses mid-range spectrum now reaches 125 million people.
Verizon aims to reach 175 million by 2022. AT&T is hosting an investor day on Friday.
Verizon shares are a Dow component and pay a 4.6% dividend.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cyber security and cloud computing.
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