Amid competition, Verizon loses key customers for first time

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21 April, 2017

Verizon's decision in recent years to give away free tablets as a way to juice subscriber numbers is also coming back to haunt it, as numerous customers who signed up for two-year data plans in exchange for a free tablet aren't renewing their subscriptions.

Verizon Communications Inc VZ.N , the No. 1 US wireless carrier, reported a 20 percent fall in quarterly profit as it lost wireless postpaid subscribers despite the re-launch of unlimited data plans. This measure was taken in a bid to defeat the appeal of the same kind of offers from Sprint and T-Mobile.

Verizon's total consolidated operating revenues in the first-quarter of 2017 were $29.8 billion, a 7.3% decrease compared with first-quarter 2016.

This New York-based carrier was once the superlative leader of the wireless industry in the U.S., whereas now it is battling to retain subscribers and getting them to opt for the paid premium service.

Do wireless customers really care about unlimited data on their cellphone plans?

The move into unlimited data marked an about-face for Verizon, which steadfastly has refused to offer unlimited data plans for fear of obliterating the bottom line, choosing instead to focus on network quality for the highest-paying customers. Long-term, the shift to unlimited is likely to hurt Verizon's profits, as it's simply less profitable to sell an unlimited data plan for $80 than it is to sell 10GB of data for $140. This in turn affected its financials - the company experienced a decline of 5.1% in its wireless business revenue.

This earnings release is the first glimpse at how Verizon has fared since launching an unlimited data plan in February.

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Verizon has explored smaller as well as bigger deals, though nothing has worked out for the company.

Our first-quarter results again demonstrated that customers value a high-quality network experience.

After Verizon rolled out its plan, however, it saw 109,000 retail postpaid phone connections, a significant turnaround.

Meanwhile, Verizon's main competitor AT&T Inc T.N plans to diversify its business through an $85.4 billion acquisition of Time Warner Inc TWX.N , which would give it control of cable TV channels like HBO and other coveted media assets. Verizon has also purchased AOL.

The stock closed down more than 1 percent on Thursday.

In a call with analysts, Matt Ellis, the Chief Financial Officer of the company 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 shareholder value, we're always looking at those opportunities". Excluding those one-time items, Visa had an adjusted profit $2.1 billion, or 86 cents per share, which beat analysts' expectations.

Verizon added 35,000 FiOS internet connections but lost a net 13,000 FiOS Video connections during the quarter.


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