Verizon acknowledged it bled subscribers again in the first quarter, explaining that it rather lose some customers than offer deep discounts.
“We have to be rational,” said Verizon’s EVP and CFO Fran Shammo, in a conference call with analysts. “We are not satisfied with any losses, but then again, we will not chase every add either, based on just cheap price. So I think that’s the balanced equation that we showed in the first quarter.”
Verizon said it lost 138,000 postpaid phone net adds as the number of new smartphone customers weren’t enough to offset the decline of 385,000 basic phones. Additionally, it said prepaid devices declined by 188,000 in the quarter. In total, it ended the quarter with 108.6 million total connections, making it the largest U.S. carrier.
Competition is mostly coming from Sprint and T-Mobile, which are willing to offer cut-rate deals to attract subscribers away from other carriers.
Because of these tactics, Verizon Wireless may not be the only carrier to lose customers in the first quarter. Goldman Sachs analyst Brett Feldman predicts that T-Mobile will be the only national wireless firm to add phone subscribers in Q1, with tablet users accounting for most of the postpaid gains at the remaining three carriers, reports Investor’s Business Daily.
Financially, Verizon benefited from the decision, reporting earnings per share of $1.02 to beat analyst estimates of 95 cents. Revenue of $32 billion rose 3.8 percent from last year, which missed expectations of $32.27 billion.
Still, Verizon’s stock is trading lower today, falling 26 cents to $49.12 a share.
During the call with analysts, Verizon said it’s comfortable charging more than others. “If it’s a customer, who is just price sensitive and does not care about the quality of the network or is sufficient with just paying a lower price, then that’s probably a customer we’re not going to be able to keep on the Verizon Wireless network,” Shammo said.
As a result, it lost some prepaid customers, who may have been able to find a better deal on another network.
“I can’t answer specifically where they went, but I would say that they probably made a choice to go to a price — a postpaid price plan because it’s actually slightly lower on some competitors than it is with us on prepaid,” he added.
Verizon said its Edge pricing plans continues to attract customers. The program allows subscribers to buy a new device using simple monthly installments. Generally, that’s been the trend in the industry, which used to offer device subsidies and lock customers into long contracts.
In the first quarter, 39 percent of Verizon’s phone activations were on the Edge program, compared to 29 percent in the fourth quarter. In the second quarter that number is expected to rise again, with about 50 percent of new customers preferring the installment plan.
When looking at the entire mix of customer additions in the quarter — including phones and tablets — Verizon didn’t lose customers. It said it added 565,000 net additions, equating to a 4.8 percent increase in customers. The mix included 621,000 new 4G smartphones and 820,000 new 4G tablets. While tablets are usually profitable, they represent less service revenues for the carriers.
