Around 27% of Verizon’s consumer base is on premium unlimited plans, and with strong uptake in the second quarter, CFO Matt Ellis sees a lot of room to continue moving customers into higher-priced tiers and growing revenue per account.
Speaking Monday at an Oppenheimer investor conference, Ellis said more than 60% of new accounts in Q2 opted for premium unlimited plans.
“We had very high step-up rates in the second quarter,” he said, with some of that benefit shown in the most recent quarterly results but a full three months’ worth of billing those higher-priced plans will show up in Q3.
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When Verizon reported Q2 results on July 21, it said continued adoption of unlimited and premium plans helped drive wireless service revenue growth of almost 6% year on year, with postpaid ARPA up 4.5% to $121.40.
And the momentum is sustainable, according to Ellis.
“This is something we’ve done for many many years. The nature of the way we go around those increases evolves over time, but we’ve always had the ability to bring a customer in at a certain price point and then step them up to higher levels as we extend the relationship with them,” he said. “So that’s absolutely something you’re seeing play through at the moment.”
Verizon had laid out plans in March for consistent increases in wireless ARPA, alongside related growth in service revenues. At the time, consumer group CEO Ronan Dunne said the carrier expected to grow the percentage of accounts on a Premium Unlimited plan to more than 30% by the end of 2021 and around 50% by 2023. Over a fifth of Verizon postpaid accounts were on a higher-tier unlimited plan at the end of 2020.
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At the end of June, Verizon had 121.3 million total wireless retail connections, including prepaid and business customers.
Currently, roughly 69% of Verizon’s customer base is on some form of unlimited plan, with the remaining still on metered data plans. Ellis said that for the vast majority of the 31% still eligible to upsell into unlimited, it would typically mean between $5-10 more per month per bill for Verizon.
If Verizon could then move the subset of unlimited plan subscribers on entry level tiers to premium unlimited – he said that usually represents an opportunity for $10 per month more for Verizon for each account.
With slightly over a quarter of subscribers on premium unlimited plans, Ellis said “we think there’s significant opportunity…to move that 27% up fairly significantly over the course of the next 2-3 years.”
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Customers have to pay for the higher-tier premium plans in order to access Verizon’s 5G Ultra Wideband service, he noted, which consists of millimeter wave as well C-band once the latter is deployed starting later this year. (Verizon’s entry-level unlimited plan, Start Unlimited, doesn’t come with access to 5G Ultra Wideband but it can be added for an extra $10 per month).
5G mmWave service is still very limited in availability, but the carrier expects to cover 100 million people with 5G using mid-band C-band in the first quarter of 2022 and 175 million people by the end of 2023.
Verizon’s Dunne has said recent 5G phone offers were a good opportunity ahead of C-band to seed the base with devices that can utilize the frequencies.
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In terms of driving service revenue, most gains for the carrier come from customers paying more for the core wireless service in higher tier plans, but Ellis noted a smaller portion comes from added products subscribers are taking such as cloud, device protection and continued relationships with content players they pay for through Verizon after a certain period.
On the consumer side, once a customer is in, it’s an opportunity to layer other products and services to deepen ties and drive more value.
Fixed wireless access is one of those avenues, which Ellis categorized as “another lever” to grow ARPA.
Verizon has mmWave-based 5G FWA home broadband in almost 50 markets, as well as a 4G LTE home internet version that launched late last year and is available in 200 markets.