Verizon Wireless is doubling the size of smartphone data plans to compete for customers and save on capital spending for older wireless technology, Verizon Communications Inc. Chief Financial Officer Fran Shammo said.
The largest U.S. wireless operator, co-owned by Verizon Communications and Vodafone Group Plc, this week bumped up the amount of data it includes with smartphone plans -- to 4 gigabytes from 2 gigabytes for $30 a month, for example. The offer is drawing customers to the company’s higher-speed Long-Term Evolution, or LTE, network and reducing the need for capital investments in third-generation, or 3G, technology.
“It’s beneficial from a financial standpoint,” Shammo said today at an investor conference in New York.
The move comes as Verizon Wireless is trying to stand out against AT&T Inc. and Sprint Nextel Corp. as the holiday-shopping season begins. Though all three now sell Apple Inc.’s iPhone 4S, AT&T is the only one offering the older iPhone 3GS, which is available for free. Sprint is the only carrier selling the iPhone 4S with unlimited data plans.
“The fourth quarter is the industry’s best quarter, so they are just trying to get some competitive edge for the holiday season,” says Chetan Sharma of Chetan Sharma Consulting in Issaquah, Washington.
Verizon’s double data plan is effectively a price cut, and the first the company has attempted since it dropped its unlimited data offer earlier this year. The new data offers are a limited-time promotion, and new users will keep the higher data allotments for the life of their contracts, Verizon said.
Verizon’s current offer makes its data plans, in some circumstances, less expensive than those from AT&T, the second-largest wireless carrier. AT&T’s 4-gigabyte plan costs $45 a month, compared with Verizon’s $30. Verizon also offers 10 gigabytes a month for $50, up from 5 gigabytes, and 20 gigabytes for $80, up from 10.
Sharma said he thinks Verizon’s LTE sales are going well. Not only is data being used as a competitive weapon, Sharma said Verizon is making the offer to “understand consumer behavior” so it can develop a pricing strategy.
It is looking primarily to see if higher caps draw different customer segments, lure customers from other carriers, reduce defections and “drive upgrades,” Sharma said.
Verizon, based in New York, fell 1.6 percent to $36.89 at the close in New York. The shares have increased 3.1 percent this year.
Spending to Slow
Shammo said Verizon still expects to spend $16.5 billion on capital expenditures this year and said there may be a decline next year. He said he plans to give a 2012 capital spending forecast in January.
With AT&T trying to acquire T-Mobile USA, the fourth-largest U.S. wireless operator, Shammo said the industry needs more consolidation to remain healthy. The U.S. Justice Department sued in August to block AT&T’s $39 billion deal.
Verizon may be interested in buying wireless spectrum from AT&T or T-Mobile if the companies sell off assets as part of the negotiations with Justice, Shammo said.