Verizon CEO Lowell McAdam insisted the US operator remains a small competitor in the mobile video marketplace compared to Google and Facebook, as he refused to rule out yet more acquisitions following the $4.83 billion deal for Yahoo’s core assets.
Speaking on the company’s Q2 earnings call, McAdam opened up on the rationale behind the deal for Yahoo, announced yesterday, while updating on its strategy to integrate the new acquisition with AOL, another internet old timer which it acquired last year.
While talking up the potential synergies between the two businesses in content delivery, advertising technology and publishing, he also said content creators and advertisers “are hungry for alternatives” in the digital video marketplace, which is dominated by just two brands (Facebook and Google).
He added that the deal for Yahoo will significantly help Verizon to “scale up to be a major competitor in mobile video”, but played down any immediate prospect of rivalling the two internet giants.
Interestingly, he suggested that the operator might need to make yet more acquisitions to “help us take a larger share of this growing market”.
“There has been a lot made of whether we are going to challenge Google and Facebook in this process,” he said. “We do plan on being a significant player, but the market is still going to grow dramatically. We are a small player today relative to them, we need to take our fair share of the market and this will be a success for us, but we certainly expect to do better than that.”
While not providing any concrete numbers or synergies generated by the combination of Verizon and Yahoo, McAdam said the acquisition would give “a significant source of revenue growth for the future”. The company plans to provide more details once the deal is near closing, expected early next year.
Q2 revenue drops
Verizon’s Q2 financial update served to underline why it is exploring new avenues to grow its top line, with operating revenue falling 5.3 per cent to $30.5 billion, from $32.2 billion in Q2 2015.
The company’s net income was $831 million, down from $4.4 billion in the year ago period, affected by pension and other post employment retirement benefits, subject to a re-measurement triggered by the new labour contracts,
A seven week worker strike in Q2 also weighed on earnings, said the company.
It ended the period with 113.2 million retail wireless connections, up 3.3 per cent from 109.5 million a year ago.
Total wireless revenue of $21.7 billion was down 4 per cent, as more consumers choose unsubsidised device payment plans.
New revenue streams from IoT grew, said the company, reaching $205 million in Q2, a 25 per cent increase year on year.