Verizon's unlimited data couldn't save worst quarter ever

While the introduction of its unlimited data plan stopped the bleeding, the company still ended up losing 289,000 phone customers.

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Roger Cheng (he/him/his) was the executive editor in charge of CNET News, managing everything from daily breaking news to in-depth investigative packages. Prior to this, he was on the telecommunications beat and wrote for Dow Jones Newswires and The Wall Street Journal for nearly a decade and got his start writing and laying out pages at a local paper in Southern California. He's a devoted Trojan alum and thinks sleep is the perfect -- if unattainable -- hobby for a parent.
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Roger Cheng
3 min read

Verizon is offering an unlimited data plan again.

Richard B. Levine, Corbis via Getty Images

Sometimes admitting you're wrong can be cathartic. In Verizon's case, it meant averting a total disaster of a quarter.

For years, Verizon has been in denial that unlimited data plans are, in fact, a thing people want. On numerous occasions, the company shut the door on the idea of bringing back an unlimited data plan. In an ad blitz in January, Verizon suggested customers were better off on its 5-gigabyte plan instead.

"At the end of the day, people don't need unlimited plans," former Chief Financial Officer Fran Shammo said in a September interview.

While you may not necessarily need unlimited, many of you absolutely want it. In January, T-Mobile went all-in on its unlimited option, removing all other options. AT&T and Sprint also touted their own all-you-can-eat options. (Check out our comparison of all the different unlimited-data plans.)

Then in February, Verizon quietly brought back its own unlimited plan for the first time in seven years.

After the New York telecommunications giant reported results on Thursday, it's clear why.

Verizon said Thursday that it lost 289,000 phone customers in the first quarter, the worst quarter in terms of subscriber growth. But it could have been much, much worse. Prior to the launch of its unlimited plan, the carrier had already lost 398,000 phone customers in the period, and the company credited the new plan with bringing about a reversal of its trajectory.

"The customer response to the launch was favorable as evidenced by an immediate improvement in subscriber activity in the second half of the quarter," Chief Financial Officer Matt Ellis said on a conference call with analysts.

The numbers underscore how important having an unlimited plan is to succeeding. Shortly after Verizon unveiled the plan, T-Mobile, Sprint and AT&T tweaked their plans to make them even more attractive, further illustrating the competitive nature of the business.

Further knocking down its results was the loss of 255,000 tablet accounts. Over the past two years, the company boosted its subscriber growth by giving away tablets in exchange for cellular service. With many of those contracts running out, customers are opting to drop their service. Ellis said he expects continued tablet losses in the coming quarters. In total, Verizon lost 307,000 postpaid accounts, or higher-value accounts that have customers pay at the end of the month.

"It had its first-ever negative postpaid adds altogether, and that meant that its revenue decline in wireless worsened, rather than getting better as it's been projecting," said Jan Dawson, an analyst at Jackdaw Research. "So it was a bad quarter almost across the board in wireless and helps explain why it did such a sudden u-turn on unlimited services."

Beyond its tussles with the other carriers, Verizon is also busying itself with the acquisition of Yahoo, slated to close in June. The company didn't offer much update on the deal beyond disclosures with the Securities and Exchange Commission.

For the first quarter, Verizon posted a profit of $3.55 billion, or 85 cents a share. Excluding one-time items, earnings were 95 cents a share, compared with a $1.06 a share a year ago. Revenue fell 7.3 percent to $29.81 billion.

Analysts, on average, forecast earnings of 97 cents a share and revenue of $30.57 billion.

Verizon shares fell 2 percent to $47.90 in early trading.

The story originally published at 4:49 a.m. PT.
Updated at 6:30 a.m. PT: To include comments from the chief financial officer and an analyst.

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