Verizon Wireless (NYSE: VZ) likely added more postpaid customers in the second quarter than analysts at Wells Fargo had previously thought, as the carrier scored thanks to promotions it launched in April.
Verizon kicks off the second-quarter earnings season for carriers when it reports its results on July 21. "We believe VZ has seen solid wireless sub growth with recent promotions such as its 10 GB for $80 and 15 GB for $100 offerings," Wells Fargo analysts Jennifer Fritzsche, Eric Luebchow and Caleb Stein wrote in a research note.
The analysts now think Verizon added 1.06 million postpaid customers in the second quarter, up from their previous estimate of 970,000. The vast majority of the tally will come from 850,000 tablet subscriber additions, the analysts estimate, with Verizon adding 159,000 postpaid phone customers.
The Wells Fargo analysts note that the Wall Street consensus is for Verizon to add 1.1 million postpaid customers during the second quarter.
In late April Verizon brought back lower promotional pricing for its More Everything shared data plans. The carrier started offering a 10 GB plan for $80 per month, down from $100, and it re-introduced a 15 GB plan for $100 per month. The plans do not include the price of monthly access charges for connecting smartphones, tablets and other devices. Smartphones bought on a two-year contract cost $40 per month each, while phones bought on Verizon's Edge equipment installment plan each cost $15 per month on plans with 6 GB or more of data.
"Unlike Q1, we expect Q2 postpaid handset adds to be positive," the Wells Fargo analysts wrote, with LTE smartphone subscriber additions offsetting continued losses in the feature phone category. "Our Q2 handset estimate is 159K (vs. Street consensus of 120K)," they wrote. "We are also lowering our Q2 postpaid churn to 0.98% (vs. 1.01% prior) to reflect (1) a seasonally lower churn quarter, and (2) VZ's recent success upgrading customers coming off contract."
Meanwhile, analysts at Macquarie Capital think Verizon will add 1.162 million postpaid customers, up from their previous estimate of 782,000. They also think Verizon will add 182,000 postpaid handset customers, up from a previous estimate of 87,000. In a research note, Macquarie analysts Kevin Smithen and Will Clayton wrote that they think Verizon's wireless service revenues will fall 1.9 percent year-over-year thanks to higher adoption of equipment installment plans, which come with lower service pricing. They think around 50 percent of Verizon's smartphone sales for the second quarter will come through EIP.
If Verizon does add more postpaid phone customers than expected, it would show resilience in the face of a promotion from T-Mobile US (NYSE:TMUS), which ran its "Never Settle Trial" promotion from May 13 through June 27 in an effort to steal away Verizon customers.
Under the promotion, Verizon customers had the opportunity to port their number to a new T-Mobile smartphone and hold on to their old Verizon phone for up to two weeks. After the trial, if customers wanted to switch to T-Mobile, T-Mobile agreed to pay any of Verizon's Early Termination Fees or outstanding device payments, up to $650, when customers traded in their phone and purchased a new one from T-Mobile.
If customers did not want to switch to T-Mobile, they were told to hand in their T-Mobile phone within 14 days, and T-Mobile agreed to refund any trial costs. T-Mobile also agreed to pay any service costs for returning to Verizon, such activation or other related fees.
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