Did you know that in 1984, the government of the U.S ordered to break AT&T (mostly known as Bell) into pieces? With a concern to break the monopoly of one of the biggest companies- AT&T, the United States Justice Department ordered the company to break up the bell system into different companies referred to as Baby Bells. Surprisingly, that was how one of the world’s largest communication technology companies, Verizon was formed.
One of the largest companies among the baby bells is Bell Atlantic which in 2000, after the acquisition of GTE, changed its name to Verizon Communications. This merger, in fact, is one of the largest mergers in US history. Verizon Communications, commonly referred to as Verizon is derived from the Latin word “veritas” meaning truth, and “horizon”. The company spent around $300 million on marketing the new brand.
Despite splitting, the baby bell remained as one of the largest telecommunications companies today innovating different products and services. So, want to know how such a large company makes money? Then let’s get into it. But before that let’s see what exactly is Verizon and its business model to better understand its revenue streams.
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What is Verizon?
Verizon Communications Inc. is one of the world’s largest American multinational telecommunications companies headquartered in New York City.
The leading technology, communication, and entertainment products and services provider was formed on June 30, 2000. The 20-year-old celebrating company made over $131.9 billion of annual revenue in 2019. The company ranked 20 in the Fortune list as of 2019.
Verizon offers data, voice, and video solutions and services on its networks and platforms. It delivers customer’s demands for security, control, mobility, and network connectivity. The company serves consumers, businesses, and government agencies with communications, information, and entertainment products and services on its wireline and wireless networks.
Read: Comcast Business Model – How Comcast Makes Money
The company works with a mission to enhance the ability of people, society, and businesses to fast forward the digitization of the world.
So, now lets the business model of the company to quickly understand how it makes money. Shall we?
Verizon Business Model
The business model of Verizon is organized into two segments.
1. Wireless Segment
Verizon’s Wireless segment includes wireless voice and data services and equipment sales. The company sells these products to consumers, businesses, and government customers under the Verizon Wireless brand.
- Verizon’s Wireless data and voice services include the following plans.
- Verizon’s wireless services are available as postpaid and prepaid plans.
- Customers that opted to pay for network service allowance in advance are postpaid connections. The extra services used are billed in monthly arrears.
- The prepaid service doesn’t include a long term contract or payment in advance.
- The company offers messaging services, access to the internet wirelessly on devices that have 3G EV-DO modules, 4G LTE, or other devices such as USB modems, Jetpacks, mobile WiFi, etc.
- Verizon offers some value-added services such as machine-to-machine (M2M). The company purchases a majority of wireless devices and accessories from popular brands such as Samsung, Apple, LG Electronics, HTC, BlackBerry, etc. Verizon makes money from these product’s sales.
The company has the largest Fourth-Generation Long-Term Evolution technology. It also has 3G Evolution-Data Optimized networks of any US wireless service provider.
Read: Apple Business Model – How Apple Makes Money
2. Wireline Segment
The Wireline segment includes voice, data and video communication products and services consisting of broadband data and video services. It also offers corporate networking solutions, security, managed network services, data center & cloud services, and local and long-distance voice services.
Verizon offers its wireline products and services to consumers and businesses across the world.
The wireline segment is again divided into three subsegments.
- Mass markets operations
- Global enterprise
- Global wholesale
Mass markets operations
This includes broadband services including high-speed internet, FiOS Internet and FiOS Video Services, local exchange and long-distance voice services to small business customers as well as residential customers both as bundles and separately.
Global Enterprise
This includes core communication services and strategic services to state and federal government customers, medium and large business customers and multinational companies.
The core communication services in the global enterprise include core data, voice services, customer equipment, installation and maintenance service.
The strategic services comprise of products and solutions related to networking (IP, Ethernet access, optical services) and advanced communication services (IP communication, M2M, security, infrastructure, cloud services, internet access, etc).
Read: Venmo Business Model – How Venmo Makes Money
Global Wholesale
The Global Wholesale segment provides communication services (data, voice, broadband services to local, & long-distance services) for customers using the company’s facilities.
Okay, now that you have seen various segments of Verizon’s business model. Now let’s jump into how it makes money from them.
How Verizon makes money?
As you can see, Verizon has built multiple business strategies and offers different products and services. The company makes most of its revenue from sales.
Okay, let’s discuss that in detail.
Product Revenue
Having said that, Verizon offers devices manufactured by Apple, LG Electronics, Blackberry, HTC etc., for sale. The devices include phones, tablets, headsets and other accessories.
Subscription Revenue
Verizon offers voice, data and video communication solutions as subscription services. It generates a notable portion of revenue from sales of such subscription plans.
Advertising Sales
The company lets brands advertise on its website and devices and generates revenue from it. The companies pay Verizon for using display and search advertising options to promote their brands and products.
Verizon by Numbers
- The annual revenue of Verizon in 2019 is $131.9 billion.
- The company is present in 150 global locations with 133.2k employees.
- The company made $19.7 billion in annual net income in 2019.
- Verizon has about 120 million retail customer base as of 2019.
- The company ranked 20 in the Fortune list in 2019.
- It generated a total of $7.7 billion in Q3 2020.
- It has over 94.544 million retail wireless connections
- Over 5.9 million people subscribed to Fios internet plans and 4.1 million subscribed to Fios video.
Final Thoughts
So, that is how Verizon makes money. With its key strengths such as market dominance, global operations, effective and strategic business model and acquisitions, Verizon has a long way to go. The company has to overcome a few challenges such as over dependence on the US market, lack of diversification and charging extra for data etc., to keep its position, though. However, the company holds many opportunities to grow even bigger and dominate the global market which we might see in the future.
