Verizon's growth prospects look grim, but there's a way it could climb out of the doldrums

On Thursday, Verizon turned in a dismal earnings report, with profits falling 20% and post-paid phone subscriber losses reaching a record high.

“At least they’re setting records,” T-Mobile CEO John Legere tweeted gleefully. There was a lot to be pleased about if you’re a T-Mobile exec.

Verizon missed Wall Street expectations on multiple fronts, with a net loss of 307,000 retail post-paid (contract) connections, including 289,000 phone losses.

That is brutal, and it underscores how much Verizon needs to shake up its business to succeed in the next phase of the wireless wars. Verizon’s growth is slowing and competition is fierce.

Verizon knows it, too.

After pressure from smaller players like Sprint and T-Mobile, Verizon brought back its unlimited plan for the first time in over five years. That helped Verizon stem some of its subscriber losses this quarter, according to Verizon, which said it would have lost nearly 400,000.

And even following the Yahoo data breach controversies, Verizon is still going through on its plan to buy it (at a discount), and combine it with AOL in a new brand called “Oath.”

These two examples show how desperately Verizon wants to open up new avenues for growth.

The future of media

In 2015, AT&T bought DirecTV for almost $US50 billion, and the company is currently in the process of buying Time Warner for $US85 billion (pending approval, which looks promising). AT&T’s idea is that — particularly with loosening government regulation around “net neutrality,” and the coming of high-speed 5G — wireless carriers can dominate the next phase of entertainment production and consumption.

There are indications that Verizon wants in on this future.

In 2016, Verizon spent $US200 million on programming for go90, its a millennial-focused video service that’s meant to be a cross between YouTube and Netflix. Go90 has struggled to attract users, but Verizon keeps committing huge piles of cash to it. Verizon has also invested heavily in or bought digital video players like AwesomenessTV and Complex.

But perhaps most telling were Verizon CEO Lowell McAdam’s comments this week about a potential merger with Comcast, Disney, or CBS.

“If [Comcast CEO] Brian [Roberts] came knocking on the door, I’d have a discussion with him about it,” McAdam told Bloomberg. He also said he would also pick up the phone from Disney CEO Bob Iger or CBS CEO Les Moonves if they called up to discuss a merger.

The breadth of those companies is telling. The takeaway: Verizon is interested in any major successful media company it can get its hands on. Investors and analysts think the Trump administration might open the door for that.

“Investors are betting on a flurry of consolidation for the telecoms sector under a perceived more lenient Trump regulatory regime,” according to the Financial Times.

If Verizon does follow AT&T into the big-ticket media frenzy, the question will be how much value it will be able to wring out of the deals. Verizon has struggled with go90, but building an entertainment business inside a giant telecom company, from scratch, is no easy feat. Finding ways to push the boundaries of net neutrality to carve out value might be easier, especially if wireless TV becomes a reality with 5G.

Get the latest Yahoo stock price here.

NOW WATCH: A healthcare expert explains why you should think twice before taking an ambulance to the hospital

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.