Verizon Wireless has again altered its rate plan structure in a move that could indicate the carrier is indeed beginning to feel pressure from its aggressive rivals.
As reported by FierceWireless, Verizon Wireless is cutting $10 off the per-month charge for smartphones accessing data buckets up to eight gigabytes, and $25 per month for smartphones accessing data buckets of at least 10 GB, provided that customers on those lines have also signed up for the carrier’s Edge device payment plan.
For its More Everything plans that include at least 10 GB of data, the price of four smartphone lines accessing that bucket is now priced at $160 per month, or the same as what AT&T Mobility has been aggressively marketing since early February as part of its Mobile Share Value offerings. Verizon Wireless rolled out its More Everything plans shortly after AT&T Mobility rolled out its offering, though the change still had Verizon Wireless priced at a premium compared with its smaller rivals.
AT&T Mobility has since adjusted its pricing on fewer lines of service and smaller data buckets to account for less than four lines of service and data buckets down to 2 GB. T-Mobile US followed that move by adjusting its Simple Choice plans offering entry-level and mid-tier users a larger data bucket while charging heavy users a bigger toll.
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. Sprint’s Chairman Masayoshi Son has recently claimed he would unleash a pricing war on Verizon Wireless and AT&T Mobility tied to the possible acquisition of smaller rival T-Mobile US.
Verizon Wireless’ latest move comes just days after the end of the first financial quarter. 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.”
Analysts have forecast continued strong growth for Verizon Wireless for the first quarter, though customer additions are expected to come in short of that expected from T-Mobile US.
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