Verizon's profit sinks as it loses wireless subscribers
- Author: Ronnie Bowen Apr 21, 2017,
Apr 21, 2017, 17:25
Verizon said it lost 307,000 retail postpaid subscribers on a net basis in the first quarter.
More Verizon customers used the unlimited plan to reduce their bills - moving from expensive data plans to the cheaper unlimited one - than customers chose to pay up. Even if Verizon still has the most wireless subscribers in the US, compared to its competitors, T-Mobile USA has gained millions of consumers over the past few years with an approach of offering better deals.
Total revenue, which includes the wireline segment and Fios service, fell 7.3% to $29.8 billion.
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.
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What happened with Verizon this quarter? Verizon said it would have lost even more customers if it hadn't launched the unlimited plan. 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. Prices for wireless telephone services fell 11.4% in March from a year earlier, after a 7% decline in February.
Verizon has been struggling to fend off smaller rivals T-Mobile US Inc TMUS.O and Sprint Corp S.N in a maturing market for USA wireless service, and in February offered an unlimited data plan for the first time in more than five years. Verizon gained 209,000 post-paid phone customers in the period and AT&T lost 1.2 million. Verizon's churn increased from 1.03 to 1.15 percent of all customers in the first quarter, a strong sign that the race-to-the-bottom between the carriers is starting to see results. Verizon blamed the decline on a drop in revenue received from overages, the cost of promoting the business, and a decline in the number of postpaid customers. Verizon is also lagging key rival AT&T (T, Tech30) - although Ma Bell's shares are down 5% in 2017. The company also reported that earnings and sales for its latest quarter missed Wall Street's forecasts. In premarket trading on Thursday, the company's shares sunk over 2%, while the stocks have dropped by over 8% from the starting of this year.
". if there is the right opportunity out there to accelerate [Verizon's] strategy organically in a way that adds shareholder value, we're always looking at those opportunities", Verizon Chief Financial Officer Matthew Ellis explained McAdam's comments in a conference call Thursday.
Verizon added 35,000 FiOS internet connections but lost a net 13,000 FiOS Video connections during the quarter. During the first quarter, the amount of traffic on Verizon's LTE network rose 57% year-over-year.