Verizon's Shammo predicts 'acceleration' in postpaid business through 2012
Verizon Wireless (NYSE:VZ) expects to continue to accrue postpaid customers throughout this year, said a top Verizon executive. The carrier also expects to stay the course on its prepaid Unleashed business, despite continued pricing pressure from low-cost prepaid providers.
"Coming out of the first quarter I said that we would have an acceleration of growth [in postpaid] in the second quarter," said Verizon EVP and CFO Fran Shammo during the Oppenheimer Technology, Internet & Communications Conference in Boston. "I would say that I would continue to see that acceleration happening in the third and fourth quarter."
Shammo didn't provide further specifics or postpaid net add forecasts. In the second quarter Verizon Wireless notched 880,000 net postpaid subscriber additions, down from 1.3 million in the year-ago quarter but above the 660,000 analysts had estimated, according to Reuters. Verizon had 501,000 net postpaid additions in the first quarter of 2012.
Shammo also said Verizon is satisfied with its place in the prepaid market, which he said leverages the carrier's existing 3G CDMA network.
"Obviously we are a postpaid carrier, so anything we do--it's the religious belief that you can't do anything that's going to deteriorate the postpaid base," he said. "But if you look back two years ago, all the way to the third quarter of '11, we were losing share in the prepaid market. Our prepaid net adds were negative for a period of two years. We think we think we found a niche here with the Unleashed product where we're actually growing share again."
And Shammo said Verizon doesn't expect to lower prices on its prepaid offerings, despite increasing pricing competition from the likes of MVNOs, MetroPCS (NYSE:PCS) and Leap Wireless (NASDAQ:LEAP). Verizon sells its unlimited texting, calling and basic web service--dubbed Unleashed--for $50 per month. The offering is more expensive than similar offerings from other companies; for example, MetroPCS currently offers unlimited talking, texting and 3G data for $40 per month and the Straight Talk service from TracFone, the U.S. MVNO of América Móvil, offers unlimited talk, text and data for $45 per month. Verizon also recently launched an $80-per-month prepaid pla that offers unlimited voice, texting and 1 GB of data.
"I think people are willing to pay a slight premium," Shammo said of Unleashed. "I think at this point we are very, very satisfied with where the prepaid market is. We're premium to that prepaid market, and based on our growth trajectory rate we're very comfortable with that price point."
Verizon nabbed 290,000 retail prepaid net additions during the second quarter.
During his appearance, Shammo touched on other areas of Verizon's business. He said he expects Verizon's smartphone subsidy expenses to continue to fall while the carrier's margins will continue to rise. He also said Verizon will maintain its 3G CDMA network for "a very, very long time" in order to support niche products including machine-to-machine applications.
Finally, Shammo hinted that Verizon could be interested in offering an "off-peak" service for LTE data--similar to the current model where night and weekend voice calling doesn't count toward subscribers' monthly allotment of voice minutes. "The LTE network gives us a lot of capability to do a lot of different things," Shammo explained, but declined to provide further details. AT&T (NYSE:T) CFO John Stephens talked about a similar concept during his appearance earlier at the Oppenheimer conference.
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