Verizon predicts Edge adoption will double as distribution widens
Chief Financial Officer Fran Shammo says he "feels much better about the second quarter."
Verizon expects more people opting to pay for their mobile devices over monthly installments, part of an industry shift in how consumers pay for their wireless service and equipment.
The company's adoption rate for its Edge monthly installment and upgrade program was 15 percent in the first quarter, according to Verizon Chief Financial Officer Fran Shammo. He said he expects that rate to double to 30 percent as the wireless carrier expands its availability to its resellers in its indirect channel.
Verizon's warmer embrace of its Edge plan -- which launched last year following similar offers by T-Mobile and AT&T -- comes as the company suffered its first ever loss of phone customers in the first quarter. The Edge plan lets customers pay for their phones bit by bit each month and allows them to upgrade earlier than the typical two-year cycle, all in exchange for a lower monthly service fee. As a result of the competitive pressure, Verizon also introduced a low-end budget phone plan and added more perks to its Share Everything plan, which it dubbed "More Everything" in an effort to turn things around.
"We exited the quarter better than we entered the quarter," Shammo said at an investor conference on Tuesday. "I feel much better about the second quarter."
Shammo disputed the notion that there was a price war in the wireless industry, noting that the shift to monthly installment programs has only moved revenue from the service side to the equipment side. In other words, the monthly installment on the device make up for the cheaper service plans.
"The industry is very health and has a lot of room for growth," he said.
While he acknowledged that Verizon, the No. 1 carrier in the US by customer base, could be criticized for moving too slow, he reiterated his desire to move at a "measured approach" and not to overreact to the competition.
Shammo bemoaned the investor focus on phone net additions, which was a weak spot for Verizon during the first three months of this year. He noted that the company posted record net additions of 634,000 tablets. The machine-to-machine segment, which involves connecting non-traditional equipment to a cellular connection, saw 40 percent revenue growth.
"There's more to the ecosystem than the smartphone category," he said, adding that overall service revenue is the better metric to focus on.
Investors often look at smartphone additions as a key metric because it often brings in the most revenue. Tablets and M2M devices don't contribute anywhere near as much revenue.
On the top hot topic of potential consolidation, Shammo said that a merger between two of the four national wireless carriers wasn't going to change its strategy, although he added he was happy with the market's four players.
Verizon, meanwhile, wasn't looking at any major deals, although Shammo left the door open to smaller acquisitions.
"There is nothing we need to execute on our strategies," Shammo said. "We think we have the best assets in the industry."
Shammo was similarly mum on the potential merger between Comcast and Time Warner Cable, noting Verizon already competes with both.
"We'll see how this plays out," he said.
Verizon's FiOS home TV and Internet service also missed expectations in the first quarter, which Shammo attributed to the rough winter weather in the Northeast. He believes the first quarter marks a low point in customer growth, and still maintains a target of 600,000 net new customers to the FiOS platform this year.