Despite domestic wireless penetration at or near 100%, Verizon Wireless is confident it can continue adding new customers whether from rivals or multi-device accounts.
Speaking at an investor conference this week, Verizon Communications CFO Fran Shammo noted the company did not think the “net-add” game was over for wireless as shown by the success Verizon Wireless has seen with its Share Everything plans.
“So the way we look at this is the plan is working the way we thought, maybe in a different device, but people are adding more devices, which is a net add,” Shammo explained. “So if you think about that ‘MiFi’ card or a dongle, or you think about the camera that we launched in the fourth quarter which was an LTE-enabled camera, that yet is another attachment to that Share Everything plan. So the net add piece of it hasn’t – I would say we believe that net adds will continue to fuel growth. They won’t all be smart net adds, smartphone net adds, but there is going to be additional devices that come through a net add perspective.”
Verizon’s confidence in its wireless offering, which it owns a controlling stake in through a partnership with Vodafone Group, comes after the company reported a record 2.1 million net customer additions during the fourth quarter of last year, with a majority of those net additions signing up for contract services.
Shammo noted that along with customers adding more devices to a shared data plan comes increased usage and in turn customers are looking at adding larger and more expensive data buckets.
“So we look to add growth really coming from device attachment/net adds and people will have to increase their usage pattern, because of the LTE network, the speed, attaching more devices,” Shammo added. “Their profile of usage is going to increase. So we believe growth comes from really those two perspectives in the wireless industry.”
Shammo acknowledged that many of the new customers coming to the carrier’s service start out spending less per month than more established customers, but that the carrier expects that spending to lift as the new customers begin adding more devices.
As for the potential for increased competition from bolstered rivals, Shammo said he thought current deals between Sprint Nextel and Softbank as well as between T-Mobile USA and MetroPCS are good for the industry, though the carrier was keeping its focus on improving its own operations.
As for increased competition at the low-end of the market, Shammo explained that Verizon Wireless was not really set up to go after the “all-you-can-eat” space, though he did add that the carrier was looking to be a bit more aggressive on no-contract pricing and reseller partnerships with its legacy 3G network.
“So the 3G platform is where I can be a little bit more aggressive at times, but at the end of the day there are going to be areas and niches which I am not going to play in,” Shammo said.
One area where Shammo does expect to see dramatic changes is in the field of device subsidies, something that continues to impact the bottom line of carriers, especially those that continue to see strong postpaid customer additions. Shammo said he expects the subsidy model to change going forward due to increased competition amongst operating systems, with Microsoft’s Windows Phone and BlackBerry expected to become aggressive rivals to the established duopoly that is Apple’s iOS and Google’s Android.
“I am a true believer as these operating systems start to really take hold, and I think the Windows one will, I think Blackberry will come back into the market, then you are going to start to see more competition which leads to lower prices,” Shammo said. “So I think it is going to follow the same way that I watched the basic phones come over time. I think smartphones will do the same thing. So I am a believer that over the next two to three years subsidies will start to decrease just because of the ecosystem.”
Also helping to lower device pricing is expected to be the eventual removal of support for the carrier’s legacy CDMA service, which Shammo said could begin as early as late 2014. To help foster that transition, Shammo reiterated that Verizon Wireless was still on track to begin rolling out voice over LTE services in late 2013 or early 2014, which will then allow the carrier to remove support for voice services that currently run over the CDMA network.
“That also starts to reduce subsidies. So over the next two to three years I think we will start to see subsidies come down,” Shammo said.
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