Verizon slashed the value of its Business operating unit, citing a downturn in the division that highlights the company’s ongoing challenges in converting that business toward new technology opportunities.

Verizon in a Securities and Exchange Commission (SEC) filing stated that the devaluation was part of the carrier’s most recent five-year strategic planning review. That review found a notable downturn in its Business unit over the past year, which resulted in Verizon recording a $5.8 billion impairment during the fourth quarter of last year on that operating unit.

Verizon specifically cited “secular declines as well as continuing competitive and macroeconomic pressure, in wireline revenue across its customer groups.”

“In the fourth quarter of 2023, in connection with its annual budget process, Verizon completed a comprehensive five-year strategic planning review of its Business reporting unit resulting in lower financial projections compared to the prior year five-year strategic planning cycle,” Verizon said. “The revised projections were used as a key input into the Business reporting unit’s annual goodwill impairment test performed in the fourth quarter of 2023. The impairment test determined that the fair value of the Business reporting unit was less than its carrying value.”

Verizon added that the goodwill balance of its Business unit at the end of last year was $1.7 billion.

Verizon Business includes the carrier’s wireless and wireline services targeted at enterprise and public-sector customers. Those services include its ThingSpace IoT, 5G edge, private 5G, security, managed SD-WAN and Virtual Network Services (VNS).

As noted in the filing, that unit has struggled to grow overall revenues as its legacy wireline operations continue to drag on wireless opportunities. Verizon Business revenues through the first three quarters of 2023 were lagging about 3% behind what it posted over the same quarters in 2022, however operating income was down a more substantial 20% year over year.

Verizon CEO Hans Vestberg early last year shook up the carrier’s business leadership, moving former Business CEO Sowmyanarayan Sampath to head up Verizon’s Consumer business and replacing him with Kyle Malady, who had been head of Verizon’s Global Networks and Technology division. Sampath had been in charge of the business unit for less than a year.

Vestberg at that time stressed the need to have deeper network insight in the Business group.

“The technology is moving forward, especially in the Verizon business segment,” Vestberg said during a conference call announcing the leadership change. “It’s very important to have the technology acumen to be able to talk to the customers, the CIOs of our customers, the chief procurement officers, and even the CEO, so [Malady’s] extremely capable of doing that given his background and his way of leading.”

However, Verizon Business continues to struggle.

Verizon CFO Tony Skiadas recently told an investor conference that the carrier was not “immune” to ongoing macroeconomic issues, including “business pressures, tech pressures with layoffs and things.”

“We're still in the middle innings on the business wireline part of the equation as those customers continue to transition their services off of legacy products. So still work to do there around the product portfolio,” Skiadas said. “Obviously, we see customers stepping into more mobility and fixed-wireless access (FWA) and private 5G networks, so we hope that trend continues, but we're still seeing declines in the top line of business wireline.”

During that call, Skiadas did state that the carrier’s business unit accounted for more than one-third of the carrier’s robust FWA connection growth.

“Kyle and the team are doing a steady [100,000], 135,000 fixed-wireless adds and those are both on LTE and 5G,” Skiadas said. “It resonates with customers. It’s very simple for businesses as well. You don’t have to run wires, so customers liked the product. They like the security and the reliability of the Verizon network and that’s something that’s very important for business customers.”

On the private 5G side, CEO Hans Vestberg said during the carrier’s most recent earnings call that Verizon is seeing “demand for the product continue to grow, especially those solutions built with licensed spectrum, which provides a more secure and differentiated experience for the end users.”

Despite the growing optimism, Vestberg added that he does not expect private networks to start contributing “any significant revenues that have an impact on Verizon overall in 2024. We’re going to see that in 2025.”

Verizon Business last year also entered into a long-term deal to transfer the management and support of global enterprise customers to HCLTech in a move that will also include the move of Verizon Business employees to the India-based managed network services (MNS) provider.

Scott Lawrence, SVP of global solutions at Verizon Business, explained in an interview with SDxCentral at that time that the deal also offloaded Verizon Business’s ongoing development of advanced managed network services, which Lawrence said will accelerate its ability to support more advanced digital transformation tools.

“This will allow us to leapfrog into next-generation contemporary digital platforms, which Verizon has been exploring over the last 18 to 24 months,” Lawrence said. “But the ability for us to build that ourselves versus leveraging these contemporary platforms that HCLTech already has in play will give us a competitive advantage over our competitors. And make no mistake: From our perspective, we are absolutely in the global managed network services business.”

Skiadas noted that the HCLTech deal was one of the ways Verizon was looking to take up to $3 billion in costs out of its operations by 2025.

“We're on track with that program and we said that approximately $200 to $300 million would fall this year in 2023, And we're very much on track with that program,” Skiadas said.

Verizon is scheduled to announce its fourth quarter and full-year 2023 results on January 24.