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Verizon to go all in on 5G, plants flag in Houston

Phone subscriber growth is back in the second quarter as Verizon looks ahead to 5G and prepares for a new CEO.

Verizon store in New York City

Aa Verizon store in New York City. 

SOPA Images

Verizon has a lot going on: It saw growth in its wireless phone business return for the second quarter, it announced another city for its 5G launch later this year and it's preparing to transition to a new CEO at the end of the month.

On Tuesday, Verizon said that during the quarter it added a total of 531,000 retail postpaid customers, or those who pay their bill at the end of the month. About 199,000 of them were phone customers and 369,000 came from other connected devices, like the Apple Watch. The company lost 37,000 tablet customers.

The company also noted that it added 398,000 smartphone customers, a sign that people are ditching their old flip phones.

These numbers are positives for the company, which last quarter took a hit in its wireless phone business with a loss of 24,000 phone subscribers and 75,000 tablet customers. But growth in its phone business is slowing, as the net additions this quarter were the lowest the company had seen been since the fourth quarter of 2016. 

All of this comes as Verizon prepares to launch its 5G service later this year and as it hands the leadership reins to new CEO Hans Vestberg, 52, who joined the company in 2017 as chief technology officer after a six-year stint as the CEO of Swedish telecommunications giant Ericsson. Vestberg will be replacing Lowell McAdam, 64, who has served as chief executive of Verizon since 2011. McAdam retires Aug. 1.

The future is 5G

During a conference call Tuesday, McAdam gave a bit more detail about what's ahead in terms of 5G, naming Houston as the third of four cities that'll get 5G first, along with Sacramento and Los Angeles. Verizon plans to start rolling out its fixed 5G broadband service in the fourth quarter of 2018 and into early 2019. 

The big four national carriers are in a race to deploy next-generation 5G wireless networks, which should bring faster speeds, superior responsiveness and better coverage. 5G is seen as the foundational technology for areas like self-driving cars and streaming virtual reality, and it starts with these early deployments.

So far Verizon has mostly talked about its plans to roll out 5G as a broadband replacement, with only a limited mobile 5G service this year. Meanwhile, T-Mobile and Sprint, which have announced plans to merger, are setting things up now for a commercial launch early next year. AT&T has said it will launch 5G in a dozen cities this year.

But consumers won't see any real benefits of these deployments until 2019 when the first 5G-capable smartphones hit the market. 

Executives at Verizon say that the company is focused on 5G and plans to lead the market as it did in the early days of 4G LTE

McAdam said on the conference call with investors that getting the first-mover advantage will be key to Verizon's success, adding that the company that comes out of the gate first will get more market share. And he said he's confident Verizon will beat its competitors. 

"We don't play to play. We play to win," he said. "Network leadership is at the core." 

Verizon will also have to balance its drive toward 5G with its expansion into other businesses, like advertising, to grow revenue. Over the last few years, Verizon has added AOL's and Yahoo's core businesses, forming them into its Oath unit. Meanwhile, rival AT&T has made a bigger bet on entertainment with its $48.5 billion acquisition of DirecTV and the $85.4 billion deal for Time Warner.

In his last call as CEO, McAdam said he was pleased that the company had stuck with investing in the company's network rather than making big entertainment purchases.

"I also have to say a little bit with a smile on my face — I'm glad we didn't follow a lot of the things the analysts and the bankers told us we had to do," he said, alluding to the big content acquisitions that rivals like AT&T made.  

Still, the company is still trying to find its footing in these new markets. It was forced to take a big charge this quarter for shuttering its streaming video platform Go90 at the end of July. McAdam said it will move forward with video in some fashion, but it will likely do it through partnerships. He said the company's 5G network will make it a strong partner for other companies looking to distribute video over the Verizon network.

"We are not going to be owning content," he said. "But we will be the best partner for distributing it." 

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