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Verizon's wireless business shows strain in Q1, but unlimited plan stems defections

Verizon lost postpaid retail customers in the first quarter, but the damage could have been worse without the launch of Verizon Unlimited. Verizon aims to diversify.
Written by Larry Dignan, Contributor

Verizon had a net decline of 307,000 postpaid connections in the first quarter and the losses could have been worse, but the company's unlimited data plan mitigated the damage.

The wireless giant's first quarter highlighted the fierce competition with T-Mobile, Sprint, and AT&T. In the first quarter, Verizon reported non-GAAP earnings of 95 cents a share, a penny short of Wall Street estimates. Revenue for Verizon came in at $29.81 billion compared to estimates of $30.4 billion with net income of $3.6 billion, or 84 cents a share.

Wireless revenue fell 5 percent in the first quarter to $20.9 billion.

The one bright spot for Verizon's wireless business is that the launch of its Verizon Unlimited plan seemed to stem the bleeding in the first quarter. Retail postpaid churn for Verizon Wireless was 1.15 percent in the first quarter, up 19 basis points from a year ago due to tablet churn. See: Verizon joins the unlimited wireless plan fray as growth slows

On a conference call with analysts, Verizon CFO Matthew Ellis said unlimited plans made the US wireless market more competitive in 2016 and at first the carrier chose to compete with equipment promotions. By the start of 2017, "competitive intensity escalated" and Verizon launched its unlimited data plan. Ellis added that Verizon Unlimited showed promise.

"We are confident in our network capability to efficiently manage the expected usage growth from unlimited because we have invested in technology, architecture and densification. Our early network performance is consistent with our high quality of service expectations and within the current network plan. The customer response to the launch was favorable as evidenced by an immediate improvement in subscriber activity in the second half of the quarter. In the quarter in which we added 49,000 smartphones, our phone net adds had two distinct trajectories. Prior to unlimited launch, we had retail postpaid phone net losses of 398,000 customers. After the launch, we added 109,000 retail postpaid phone customers, which gives us momentum entering the second quarter. Overall, in the first quarter, we lost 307,000 postpaid customers consisting of phone losses of 289,000 and tablet losses of 255,000, offset by other connected devices. We introduced the unlimited offering primarily to protect our high-quality base, and we achieved the desired impact."

Other key items:

  • 72 percent of postpaid phone customers were on a non-subsidized service plan.
  • Fios revenue for the first quarter was $2.9 billion, up 4.7 percent from year ago. Verizon added 35,000 Fios Internet net connections and lost 13,000 video connections.
  • Telematics revenue in the first quarter was $214 million.
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