Verizon posted strong wireless subscriber gains for the third quarter, adding 444,000 net postpaid phone connections in the period when it introduced new unlimited pricing plans that included a $5 price cut.
Verizon’s Q3 subscriber metrics were well above Wall Street expectations of 328,000 and compare to 295,000 net phone connections the carrier added a year prior.
Speaking Friday on the company’s earnings call with investors, CEO Hans Vestberg indicated the new mix-and-match data offers provide a way for Verizon to bring more customers into the unlimited plan fold, ultimately moving them up to higher-level tiers and 5G service once coverage becomes ubiquitous.
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Analysts at NewStreet Research, in a Friday note to investors, said the carrier’s subscriber additions were solid, but appear “to be driven by increased aggressiveness on the frontbook, with the entry-level Unlimited price cut and continue handset promotions.”
The firm noted that Verizon’s postpaid churn (1.09% and postpaid phone 0.82%) is ticking up, which it called “particularly concerning” given that the industry widely continues to see lower upgrade activity. Still, Verizon has the lowest postpaid phone churn rate among its competitors.
Verizon is also looking to lure more customers with a recently announced promotion that offers unlimited data plan subscribers one free year of Disney’s new Disney+ streaming service. Unlike peer AT&T, Verizon has continued to opt for partnerships in the video space, preferring to act as a distributor, rather than owner, of content.
MoffettNathanson analysts said strategically, the Disney+ deal “puts AT&T in an awful box.” Adding “this seems to be a fight that Verizon can win.”
Still, the firm indicated concern over Verizon losing its market position as wireless network leader.
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“It will take more than a clever wholesale OTT video deal to convince investors that Verizon has gotten its wireless mojo back,” wrote Craig Moffett. “For that, they’ll have to find a solution to the perception that they are trailing, not leading, in 5G.”
Verizon is using high-capacity millimeter wave spectrum for initial 5G deployments, and has said it will use dynamic spectrum sharing in 2020 to utilize spectrum for both 4G and 5G. The carrier has now rolled out 5G in parts of 15 cities, adding Dallas and Omaha to its list Friday, with plans to expand to 30 by year-end. Competitors have low- and mid-band holdings they plan to leverage for 5G that won't deliver super-fast speeds of mmWave, but provide broader coverage.
Both NewStreet and MoffettNathanson analysts pointed to Verizon’s lack of mid-band spectrum for 5G, which it needs in order to secure a competitive position longer-term, but clear mid-band options are scarce or come with challenges. The FCC is working to free up attractive C-band spectrum, but that proceeding has been controversial and the industry still awaits action.
Over the next 12 months, NewStreet said it expects competitiveness to ramp up in the wireless industry, as AT&T’s subscriber trends improve, cable operators like Charter and Comcast gain market share leveraging CBRS deployments, and Dish potentially enters the wireless business.
“Wireless competitive intensity is set to increase, and we think Verizon is likely to lose share as a result,” wrote the NewStreet team led by Jonathan Chaplin.
In the third-quarter Verizon reported wireless service revenue of $16.4 billion, up 2.7% year over year, and wireless EBIDTA of $11 billion, up 0.7%. Overall, Verizon’s total consolidated revenue increased 0.9% to $32.9 billion and Adjusted EBITDA was down 1.2% to $12 billion. Net income was $5.19 billion.
Verizon ended the third quarter with about 118.65 million wireless connections.
Its wireline segment continues to lose customers though, shedding 67,000 Fios video subscribers in the three-month period.