Why Verizon is losing more cellphone customers than ever

Verizon's decision in recent years to give away free tablets as a way to juice subscriber numbers is also coming back to haunt it, as numerous customers who signed up for two-year data plans in exchange for a free tablet aren't renewing their subscriptions.

Telecommunications giant Verizon Communications (NYSE:VZ) reported first-quarter earnings on Monday morning, which included the first time it's ever reported net postpaid wireless subscriber losses.

Competition from Sprint - as well as T-Mobile - appears to be taking its toll on Verizon. The performance marks a dramatic reversal from the first quarter of past year, when Verizon added 640,000 users.

Verizon's total turning revenues, including all the recorded wireline services, were $29.8 billion in the first quarter.

"They badly missed on every important subscriber metric, and it just underscores that the wireless business is a severely growth-challenged business at the moment", said Craig Moffett, an analyst at MoffettNathanson in an interview.

The launch of Verizon Unlimited positively changed the trajectory of customer additions in the quarter. It is a good news for Verizon since as reported earlier before the unlimited plan promo, the company is losing a huge number of customers. But once the new plans became available, they helped blunt those losses by bringing in about 110,000 new subscribers, Verizon said.

The company has also pursued revenue streams outside its core wireless business.




Most of the drop came in the weeks before Verizon introduced its "unlimited" data plan.

Verizon's retail postpaid connections base grew 1.2 percent year over year to 108.5 million, and retail prepaid connections grew 0.5 percent to 5.4 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.

Analysts polled by Thomson Reuters expected per-share profit of 96 cents on $30.5 billion in revenue.

Verizon has been able to retain customers thanks to its high-quality network. 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. Verizon's main competitor AT&T Inc. plans to diversify its business through an $85.4 billion acquisition of Time Warner Inc. and has already purchased satellite TV company DirecTV. "We're executing on strategies to capture future growth and create long-term shareholder value", he said.

The results fell short of Wall Street expectations.

Elsewhere, Verizon says tablet churn was high compared to the previous year, while LTE network use rose around 57-percent versus Q1 2016.

Verizon added 35,000 FiOS internet connections but lost a net 13,000 FiOS Video connections during the quarter.

(Copyright © 2015. All Rights Reserved.)
 
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