In an attempt to halt a severe defect of customers, Verizon Communications Inc. is sacrificing their bottom line and offering customers more data for lower prices.
The nation’s largest carrier by subscribers has posted quarterly net losses of wireless subscribers for the first time ever, during this year’s first three months. This shows how serious the damage of competitors T-Mobile US Inc. and Sprint Corp.’s revivals have had on Verizon wireless.
In February, in an attempt to regain subscribers, Verizon brought back its unlimited data plan which it had cut back in 2011.
According to Fox Business, “That offer hit financials: Verizon had a 5.1% decline in revenue in its wireless business, which fell to $20.9 billion. Total revenue has now declined four quarters in a row. The results will put pressure on Verizon’s management to either find a way to turn things around or make moves that will diversify the company away from the wireless business, where most Americans already have a smartphone and price wars have pinched profits, analysts said.”
In a research note to clients, analyst Craig Moffett wrote, “The telecom industry is growth challenged.” He added that results from other carriers could also be as bad.
A family’s wireless bill has become a major household expense. The vicious price war in the wireless industry has been to the consumer’s advantage. In March, there was a shocking drop in the consumer price index of 0.3%. Compared to the previous year, prices for wireless phone services decreased 11.4% in March, and went down 7% from February.
On Thursday, April 20, during a call with analyst, Verizon Chief Financial Officer Matt Ellis said, “We’re confident in executing our strategy organically, but if there’s the right opportunity out there to accelerate the strategy inorganically in a way that adds holder value, we’re always looking at those opportunities.”
Fox Business reports, “The introduction of unlimited plans, along with a ‘safety mode’ feature launched last year, also chipped away at lucrative ‘overage’ revenue, which comes from the fees Verizon charges when customers exceed their monthly data limits. The company’s revenue and profit came in at less than Wall Street analysts were expecting. The stock, already down 8.3% so far this year, fell another 1% to $48.41 Thursday.”
On Thursday, Verizon said that the unlimited data plans “positively changed the trajectory of customer additions” in the quarter, but a net decrease of 307,000 retail postpaid connections, including 289,000 core phone subscribers, was still reported during the year’s first three months. “That compares with 640,000 retail postpaid net additions in the year-ago period, including 8,000 phone customers. Before the launch of its “Verizon Unlimited” plans in mid-February, Verizon had a retail postpaid phone net loss of 398,000; after the launch, Verizon said it added 109,000 retail postpaid phone connections. Much of the pain Verizon is going through began as a result of moves T-Mobile began making in 2013, such as ending two year contracts and canceling overage fees. John Legere, T-Mobile’s chief executive, mocked Verizon’s results on Twitter. Verizon’s rivals are slated to report their latest results in coming weeks,” according to Fox Business.
Verizon reported a net income of $3.45 billion, or 84 cents a share, for the first quarter overall. This was down around 20% from $4.31 billion, or $1.06 a share, for the same period last year.
By Mark Snyder