Verizon's Generous Wireless Promotions Are Going Away
Aggressive offers and trade-in deals reversed subscriber declines last year, but Verizon's CEO warns that these lures won't be around for much longer.
Verizon ended the year by gaining more phone and internet subscribers over the holiday season, the carrier reported this week in its fourth-quarter earnings.
The carrier had a positive turnaround after several difficult quarters last year in which price hikes led phone subscribers to drop their plans. Over the fourth quarter, Verizon added 217,000 postpaid net phone subscribers, a metric used by the industry as an indicator of success, though the majority were for business customers, with consumers only accounting for 41,000 net subscribers, according to a press release.
Verizon's turnaround was driven by generous promotions and trade-in offers. But consumers will see fewer financial incentives to switch going forward. CEO Hans Vestberg warned Tuesday on a call with Wall Street analysts that the company will wean itself off these offers even if this results in short-term losses.
"We believe current promotion incentives are not sustainable for the industry in the long run," Vestberg said.
Verizon is on track to reach 200 million people with its C-band flavor of midrange 5G coverage by the first quarter of 2023 and is ahead of schedule to reach its target of 250 million by the end of 2023, Vestberg said. When the full breadth of C-band service goes live by the end of the year, subscribers should see speeds increase to 2.4Gbps, up from 900Mbps currently.
Verizon lost 175,000 prepaid net subscribers over the quarter. This comes after the carrier expanded its prepaid offerings by launching its Total by Verizon prepaid line to rival T-Mobile's Metro and AT&T's Cricket brands of affordable phone plan providers.
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The carrier continued to expand its fixed wireless subscriber base with gains of 379,000 net additions, bringing the year-end total to 1.3 million more net subscribers than it started the year with. Broadband gains were much more modest, with 59,000 Fios wired internet net additions. Verizon said it had the best gains in broadband in over a decade, and Vestberg said to keep expecting fiber expansion in the years ahead.
Verizon posted $35.3 billion in revenue in the quarter, slightly beating expectations of $35.1 billion and up 3.5% from the same period last year, an increase the carrier credited to migrations to pricier unlimited plans, rate hikes earlier in the year and a full quarter of contributions from prepaid phone subsidiary TracFone, which Verizon acquired in late 2021.
The carrier reported net income of $6.7 billion, or $1.56 earnings per share. Its adjusted earnings were $1.19 per share, exactly meeting expectations of analysts polled by Yahoo Finance.
Verizon set expectations of wireless service revenue growth of 2.5% to 4.5% for 2023, with more cashflow freed up after finishing deploying its C-band 5G by the end of 2022.