Is Verizon seeing the benefits from Straight Talk?

Sue MarekThere was an interesting tidbit to come out of yesterday's fourth quarter earnings report from Verizon Wireless--the operator had total net adds of 2.2 million--but 1 million of those net adds came from resellers. This is notable because, unlike some of its carrier counterparts, Verizon has never catered to the reseller channel. Instead, the company has prided itself on its abundance of retail postpaid subscribers.

When probed, Verizon Chief Financial Officer John Killian said the 1 million new reseller customers came from several different resellers. "It wasn't just one party," he said, adding that Verizon's new resellers operate at a much higher level of ARPU than the traditional reseller base Verizon has worked with in the past.

So where did these 1 million reseller customers come from? John Byrne, analyst with Technology Business Research in Hampton, N.H., said the the carrier likely saw some uptick when reseller Great Call moved its Jitterbug wireless service onto Verizon's network last year. However, he believes that the vast majority of those new customers probably came from the new Straight Talk offering from TracFone.

There are two Straight Talk plans: one offers 1,000 voice minutes for $30 per month and the other provides unlimited voice, text messaging and 30 MB of data for $45 per month. In October, Wal-Mart announced it would sell Straight Talk at all of its 3,200 stores nationwide, and at the same time TracFone expanded its Straight Talk promotional efforts.

While this appears to have turned out to be a good thing for Verizon, I suspect the carrier's success may have come at the expense of Straight Talk's competitors in the unlimited prepaid space. We'll find out when Leap Wireless, MetroPCS and the rest report their earnings in the coming weeks.

According to Mark Lowenstein, managing director of Mobile Ecosystem, Verizon started expanding its wholesale channel in 2009 following the successes players like Sprint Nextel enjoyed through its Boost Mobile prepaid unlimited brand. Lowenstein said prepaid unlimited is now the most competitive area of the industry. He also cautioned: "Not everyone will be a winner."

But Verizon must now tread carefully with Straight Talk. Lowenstein said carriers should not overly dilute their brand with these other offerings. For now, consumers likely are not really aware that Straight Talk is a Verizon service, and that's a good thing because Straight Talk is significantly cheaper than any Verizon-branded wireless plan.

"We saw this happen in the long distance business," Lowenstein noted. And the long distance market is definitely not one that wireless service providers want to mimic. --Sue