Verizon Wireless finally responded to recent pricing changes from rivals by introducing its More Everything plan, though the changes will likely not put quite as much money back in the pockets of consumers.
The new plans build on Verizon Wireless’ Share Everything offerings, but entices customers to also sign up for its Edge device payment option. Customers that select to pay a monthly, non-subsidized price for their mobile device will receive $10 off per line for data buckets of up to eight gigabytes and $20 off per line for data buckets of 10 GB or larger. Verizon Wireless did bump up the amount of data at some price points, with the $40 plan doubling from 500 megabytes to 1 GB, the $50 plan moving from 1 GB to 2 GB and the $60 plan increasing by 50% to 3 GB.
The plans still charge the same monthly access fees per device, with each smartphone running $40 per month, each basic phone at $30 per month, each wireless modem priced at $20 per month, each tablet at $10 per month and each “connected” device like a camera for $5 per month. Customers signing up for the Edge program will also be docked the monthly fee for their chosen device.
A couple of new additions to the More Everything plans are the inclusion of unlimited international messaging and 25 GB of cloud storage for each line of service. Customers can also select Verizon Wireless’ Family Base usage monitoring option and reduced international long-distance calling rates free for the first three months, and then $5 per month per feature after that.
AT&T Mobility earlier this month unveiled updated family plans that provides for unlimited talk, messaging and a shared bucket of 10 gigabytes of data services for two lines at $130 per month with no contract. The kicker is that additional lines can be added for just $15 per line, which puts overall pricing well below that of Verizon Wireless, on par with Sprint and just a touch above what is offered by T-Mobile US. The AT&T Mobility plans allow for up to 10 lines to be on a single account, which would drop the per-line price to just $25.
The AT&T Mobility move was also tied to expanding adoption of its Next program, which links the customer paying full price for a mobile device either upfront or in monthly installments or they can bring their own already paid for device to the plan.
Sprint earlier this year rolled out its “Framily” plans allowing customers to link up to 10 lines of service under one account, with customers paying less per line the more lines they have on the account. For one line of service, new Sprint customers pay $55 per month per line for unlimited talk, text and 1GB of data. For each additional new Sprint customer that joins the account the cost per person goes down $5 per month up to a maximum monthly discount of $30 per line. If the account has at least seven people, all lines would pay $25 per month per line. Customers can also add unlimited data to any one line for an extra $20 per month.
New customers signing up to the Sprint plan will be required to either pay full price upfront for their device or select Sprint’s Easy Pay device payment plan that spreads the cost over 24 months. New customers can also activate any existing Sprint device and forgo the pricing models.
All of these moves were made to counter T-Mobile US’ initial Simple Choice plans that eliminated contracts tied to rate plans and later the rollout of its JUMP device financing program.
Despite the adjustments, Verizon Wireless’ plans are still priced at a premium compared with its rivals, though the carrier does counter that it provides superior network coverage and quality for that premium. The carrier could be experiencing some recent impact on its customer growth due to the moves by rivals, though its fourth quarter operational results remained robust.
Verizon Wireless added 1.653 million direct customer additions during the final three months of 2013, dominated by the carrier’s high-margin postpaid services that contributed 1.573 million net customer additions for the quarter. The results did come up quite a bit short of the more than 2.2 million direct customer additions Verizon Wireless posted during the fourth quarter of 2012, but analysts expect the results to lead the market.
More importantly for the financial community, operating income margins increased from 24% to 29.5% year-over-year, while wireless service earnings before interest, taxes, depreciation and amortization margins climbed from 41.4% in 2012 to 47% during the final three months of last year. Analysts at Cowen & Co. noted the improvement was helped by Verizon Wireless pushing out its device upgrade policy to 24 months, thus lessening the impact of device subsidies.
During its Q4 conference call, Verizon CFO Fran Shammo seemed to indicate that despite the differences between Edge and other offerings, Verizon Wireless continued to show strong customer growth and revenue gains and thus had little reason at this point to change its strategy.
“Look on the Edge program as I said earlier we will respond where we think we need to respond,” Shammo explained. “I’m not going to get into what others have done between Edge and subsidy. I mean we had a very successful fourth quarter and what we launched in the marketplace they were receptive to that. We ran a lot of promotions in the fourth quarter and it drove a lot of growth to our business and look, I mean again we will continue to do what we do best, which is we add customers and we are profitable.”
Analysts seemed to agree with the assessment, noting that while some rivals have been able to show results from their initiatives, Verizon Wireless has been able to turn its results into a strong, and immediate financial return.
“We believe the superior performance in both subscriber flow share and margins demonstrates the company’s ability to profitably grow its market share just as others struggle to achieve the same goal,” noted Canaccord Genuity analyst Greg Miller, in a research note. “Although the successful ‘Un-carrier’ strategy by T-Mobile will likely spark some level of competitive response by others (or the perception of it), we believe Verizon could pick and choose a selection of tactical tools (certain segments, certain geographic markets) to highly selectively respond to such reactions without impacting its wireless margins, in our view.”
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