Verizon: We're not going to overreact to pricing changes in the market

Verizon Wireless (NYSE: VZ) will continue to respond to pricing changes in the market but is not going to go overboard in terms of a response, according to Verizon Communications CFO Fran Shammo.

The comments come shortly after Verizon reported first-quarter results in which its lucrative postpaid subscriber additions were down year-over-year--results that analysts said show that competitive pressures are starting to impact Verizon's results. AT&T Mobility (NYSE: T), which cut the prices of its shared data plans for families, netted 625,000 postpaid additions in the quarter. And T-Mobile US (NYSE:TMUS), in part because of its offer to pay off the Early Termination Fees of customers who switched and traded in their devices, saw branded postpaid net additions of more than 1.3 million in the period.

For its part, Verizon added 549,000 retail net connections, including 539,000 retail postpaid net subscribers and 10,000 prepaid customers, in the first quarter. However, Verizon's postpaid additions were down 20.4 percent year-over-year and the company actually lost 95,000 postpaid handset customers (its gains in the quarter were largely due to tablet activations).

"We will react rationally and where we think we need to react," Shammo said at the Jefferies Technology, Media and Telecom Conference. "The key to any competitive move is not to overreact to a competitor."

Shammo said that Verizon needs to monitor the market carefully and in the start of the first quarter it did see pressure on its feature phone customers and 3G CDMA smartphone subscribers. That's why, he said, Verizon introduced a $60 entry-level plan ($40 for a smartphone, plus $20 for unlimited voice, texting and 250 MB of data). That plan is now $55 per month. "I guess you could accuse us of not moving fast enough," he said, but he added that Verizon needs to take measured moves "because once you make the move you can't go back."

"We exited the quarter better than we entered the quarter," the Verizon finance chief said. "I feel much better about the second quarter."

Shammo said analysts have focused on Verizon losing handset customers in the quarter. However, he noted that while Verizon lost feature phone and 3G smartphone customers, it also added 866,000 net new LTE smartphone customers, who generally use more data and have higher credit profiles. Verizon also notched a record 634,000 retail postpaid tablet net adds in the quarter and said its M2M revenue grew 40 percent year-over-year. "There's more to the ecosystem than just the smartphone category," Shammo said.

Shammo also reiterated that Verizon expects to increase sales of its Edge handset upgrade program. The carrier in the first quarter said around 15 percent of new and upgrading customers signed on to the program, and as Verizon rolls out the program to its resellers, Shammo said that figure likely will rise to 30 percent.

As for Verizon's network, Shammo said Verizon is deploying its AWS spectrum in major markets to augment capacity for its LTE network, which now carries 73 percent of all of Verizon's wireless data traffic. He said Verizon would roll out AWS nationwide over the next 14-18 months.

Shammo also addressed the FCC's upcoming auctions. He said right now Verizon is most focused on the AWS-3 auction scheduled for this fall. "We will be a participant for that," he said.

As for the incentive auction of 600 MHz broadcast TV spectrum scheduled for next year, Shammo said Verizon is still evaluating that auction. He said that, since the rules for that auction are not yet final, he wouldn't comment on whether Verizon would participate. Verizon currently is lobbying against the FCC's proposed rules for the 600 MHz auction that could limit the amount of spectrum larger carriers like Verizon can bid on in the auction.

For more:
- see this webcast
- see this CNET article

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