Verizon Business Model and How it Makes Money

Verizon is one of the leading telecommunication companies in the US. The company’s headquarters in Midtown Manhattan, New York City. On top of that, Verizon Communications is one of the largest investors in America’s technology infrastructure. The company invests more than $45 million per day in its networks.

Verizon originates from the Bell Atlantic Corporation. The corporation came due to the breakup of Bell System. The company initially operated in New Jersey, Pennsylvania, Delaware, Maryland, West Virginia, Virginia, and Washington, D.C. In 1996, it merged with NYNEX and moved its headquarters to New York City.

It was the same year that the company changed its name from Bell Atlantic to Verizon Communications. The name change came due to its merger with telephone company GTE. At the time, it was one of the largest mergers in the history of the US. Soon, the company became the largest local telephone company in 40 states across the US.

The company went through many ups and downs during the years. Overall, however, the company has been profitable. Over the past decade, the company has generated a net positive income. Similarly, the company has experienced growing revenues and hitting more stable revenues recently. The company has also performed exceptionally well on the stock market.

Verizon’s profitability and revenues come from its US market segment. However, Verizon does not only operate in the US. It also works in 24 countries with over 200 data centers. The company has also had some luck with investments, which have increased the company’s overall profitability. For example, Verizon has expressed its interest in investing in drone and self-driving vehicle technologies.

Similarly, the majority of the company’s revenues come from its wireless telecommunication services. Despite that, the company still operates its landline business.

The company also has several partnerships and integrations with other businesses. Through these, Verizon can market its products and provide better services to customers. These partnerships allow Verizon and its partners to come together and mutually benefit from the customer’s interests.

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Overall, Verizon is a highly profitable company. The company’s records and performances provide an insight into how it has performed in the past. One of the reasons for Verizon’s high market dominance and profitability is its business model. The business model of Verizon also provides details of how Verizon makes money.

What is Verizon Business Model?

Verizon organizes its business model into three segments. These include the Wireless, the Wireline segments, and Corporate and Other segments. Each of these generates revenues for the company but in different ways. Here’s a detail of each segment separately.

Wireless Segment

In the wireless segment, Verizon provides wireless voice and data services and equipment sales. The company generates revenues from the products it sells to consumers. These include individuals, businesses, government customers, etc. There are some services that the company provides through this segment.

Verizon’s Wireless segment includes revenues from both postpaid and prepaid plans. The customers that opt to pay for network services in advance are prepaid users. These services don’t consist of any long-term contracts. Usually, the customers for prepaid plans are individuals who use Verizon’s wireless services on a small scale.

On the other hand, those that use the services and pay later are postpaid users. Postpaid users receive a bill each month in arrears that they have to pay as per their usage. These include long-term contracts made with customers, which usually include businesses, companies, or other organizations.

Through the Wireless segment, the company provides various services. These include mobile Wi-Fi, 3G EV-DO modules, 4G LTE, USB modems, etc. Verizon also offers value-added services such as machine-to-machine (M2M). The company purchases devices from major smartphone manufacturers, such as Apple and Samsung. Then it sells those devices with its wireless plans to make money.

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Wireline Segment

As mentioned, the company also uses its Wireline segment to generate revenues. It includes voice, data, and video communication products and services, including broadband data and video services. The segment also offers corporate networking solutions, security, managed network services, data center & cloud services, and local and long-distance voice services.

The company provides these services worldwide. The segment also has three other subsegments, which are as below.

Mass market operations

This subsegment includes broadband services. These services include high-speed internet, FiOS Internet and FiOS Video Services, local exchange, and long-distance voice services. The customers for this subsegment are small businesses and residential customers. The company offers these services as either separate or bundle deals.

Global Enterprise

Through this subsegment, the company offers core communication and strategic services. The customers in this subsegment are medium and large businesses, multinational companies, and federal government customers. The core communication services in this subsegment include core data, voice services, customer equipment, installation, and maintenance services.

On the other hand, the strategic services include products and solutions related to networking (Ethernet access, IP, optical services) and advanced communication services (IP communication, M2M, infrastructure, cloud services, security, internet access, etc.).

Global Wholesale

The company also offers communication services, such as voice, broadband services to local and long-distance services, to customers using Verizon’s facilities. These operations are at a global level and include international customers.

Corporate and Other

The corporate and other segment includes results of Verizon’s Media business. This segment was operated in 2018 under the “Oath” brand, Verizon’s telematics business, branded Verizon Connect, and other businesses. It also includes investments in unconsolidated businesses, unallocated corporate expenses, pension, and other employee benefit-related costs, and interest and financing expenses.

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How Does Verizon Make Money?

As mentioned, Verizon makes money from all of the above market segments. Overall, the company generated revenues of $131.868 billion in 2019. It was a total increase of 0.77% over the $130.863 billion in revenues that the company generated in 2018. Overall, the company has had steady incomes over the last few years, which is always a good thing.

Given below are details of how Verizon makes money from each of its segments. The details in these segments below are from the unadjusted revenues of the company.

Wireless Segment

The Wireless segment is the company’s highest revenue-generating segment. The company generated $94.2 billion from this segment in 2019. Similarly, it generated $91.73 billion in this segment in 2018. The segment’s revenues increased by 2.69% over the year. This segment accounted for 71.04% and 69.79% of Verizon’s total revenues in 2019 and 2018, respectively.

Wireline Segment

The Wireline segment is the company’s second-largest segment in terms of profitability, although not as significant as the Wireless segment. The company generated revenues of $28.6 billion from this segment in 2019. Similarly, it made $29.76 billion in 2018. The Wireline segment experienced a revenue fall of 3.90% over the year. The segment accounted for 21.57% and 22.64% of the company’s total revenues in both years.

Corporate and Other Segment

The corporate and other segment isn’t as substantial for the company. This segment generated revenues of $9.81 billion and $9.94 billion in 2019 and 2018, respectively. The segment saw a drop of 1.31% over the year. Similarly, it accounted for 7.40% and 7.56% of Verizon’s total revenues for 2019 and 2018, respectively.

Summary

Given below is a summary of Verizon’s revenues from its different segments. These revenues represent the unadjusted revenues and not the final consolidated revenues reported in Verizon’s financial statements.

Segment2018 (in USD billions)2019 (in USD billions)
Wireless91.7394.2
Wireline29.7628.6
Corporate and other9.949.81
Total131.43132.61

Conclusion

Verizon is among the leading names in the US telecommunication market. The company provides a large portion of its products and services in the US market. However, it also operates in the international market. The company is highly profitable due to its business model. A summary of the Verizon business model and how it makes money is provided above.

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