Verizon Adds Fewest Subscribers In 6 Years Amid Price War

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Verizon Communications suffered its worst quarter of subscriber growth in more than six years amid intensified price competition from smaller rivals, adding pressure on the company’s media and advertising ventures to take up the slack for a rapidly maturing wireless business.

The nation’s largest wireless carrier signed up 442,000 total subscribers in the third quarter, falling far short of the 875,000 average of eight analysts surveyed by Bloomberg.

The results underscore a strategy by Verizon to protect profits in lieu of offering steep discounts. Third-quarter earnings excluding some items were $1.01 a share, New York-based Verizon said Thursday in a statement. Analysts predicted profit of 99 cents a share, the average of estimates compiled by Bloomberg.

With Sprint Corp. and T-Mobile US Inc. leading a price battle, Verizon is facing the challenge of holding on to big-spending customers by emphasizing service quality over price. Sprint Corp., which hired Verizon’s former “can-you-hear-me-now” pitchman for national TV ads, added 344,000 new monthly subscribers in the period.

Lucrative family-plan customers tend to be more loyal than single-line users and pay up to connect phones, tablets, Wi-Fi hot spots and even cars. T-Mobile and Sprint, the third- and fourth-largest carrier, respectively, introduced unlimited data plans to win over these families, many of which are anxious about running up big tabs watching videos on YouTube, Snapchat and Netflix.

Yet Verizon has no intention of selling unlimited-data plans, Chief Financial Officer Fran Shammo said on a conference call Thursday. The company will hold the line and “continue to be rational” about pricing, he said.

“Verizon’s unwillingness and perhaps inability to offer unlimited data plans might be impacting its ability to hold onto its customers,” Walt Piecyk, an analyst at BTIG LLC, said.

Verizon lost 36,000 monthly phone customers in the third quarter, down from a gain of 430,000 a year earlier. Analysts expected 294,000 new monthly phone customers, according to a Bloomberg survey.

Third-quarter sales were $30.9 billion, a 6.7 percent decrease compared with a year earlier, the company said. Analysts predicted $31.1 billion on average.

The carrier added 36,000 FiOS TV subscribers, less than 42,000 a year earlier. Analysts predicted 59,000.

The rate of monthly subscriber defections was 1.04 percent, compared with 0.93 percent a year earlier.

Margin on wireless service earnings before interest, taxes, depreciation and amortization was 59.54 percent. Analyst predicted 59.60 percent.

Capital spending will be at the low end of a $17.2 billion to $17.7 billion range, the company said.

Excluding a 7-cent a share impact from the labor strike, Verizon expects full-year adjusted earnings to be even with 2015 levels.

As the wireless-service industry matures, Verizon is trying to turn the business in a new direction. Using go90, its video-streaming business, AOL’s web properties and the pending purchase of Yahoo! Inc., Verizon is entering a mobile video and advertising arena to challenge Google and Facebook Inc.

Verizon said in its earnings statement that the $4.85 billion Yahoo deal should close in the fourth quarter. Shammo said Yahoo’s post-deal disclosure of a 2014 hack of its subscribers could have a material effect on the deal, but said the company is still evaluating what it means to the transaction.

While it adds pieces like Yahoo, Verizon is also shedding businesses it no longer considers a focus. The company is in late-stage talks with one potential buyer of its data centers and expects to announce a decision on the sale in the coming weeks, Shammo said on the earnings call. According to a Oct. 5 note from Cowen & Co. analyst Colby Synesael, Equinix Inc. is the interested party, and the sale is imminent.

(c) 2016, Bloomberg · Scott Moritz 

{Matzav.com}


1 COMMENT

  1. Yeh, I used to have Verizon when I was young and wealthy. Yes, they definitely have the best coverage across the country, hands down. But they are the worst crooks and gangsters. They are like traffic cops, here in NYC. They are out to make your life miserable with their constant nickel and diming and all their hidden fees and extra taxes.
    Then I finally wised up, dumped Verizon, and now have MetroPCS. It works perfect here in the City. It even works in basements. Yes, it didn’t work when I went up to the Catskill’s for visiting day, but that’s only for one day a year. Big deal. I pay $25 a month for unlimited talk,text, & web. No contract. My wife and 2 of my kids also switched to MetroPCS. $25 – complete. THAT INCLUDES TAX – NO ADDITIONAL CHARGES.
    Btw, I had a separate cellphone from where I work, using Sprint. OMG, they suck! Sprint is the worst of the worst. I can’t tell you how many dropped calls I had just driving in Brooklyn. I lost costumers because of them. They are thee most unreliable carrier. Also, their customer service is in the toilet.

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