Verizon Beats Back Competitors With Focus on High-End Customers

  • No. 1 carrier adds 1.5 million subscribers in fourth quarter
  • Verizon's service quality the 'foundation': CFO Shammo

Verizon Communications Inc. is fending off competitors by focusing on what it knows best: high-paying customers.

In the fourth quarter, the nation’s largest carrier added 1.5 million new postpaid monthly subscribers, who tend to spend more on new devices and data service, beating the 1.4 million average estimate of five analysts surveyed by Bloomberg. The company also retained more customers than it did a year earlier, posting a churn rate -- or pace of monthly defections -- of less than 1 percent, which is lower than a year earlier, according to a statement Thursday.

“Despite an intensely competitive wireless landscape, Verizon has proven it can continue to grow its high-value subscriber base,” said Kevin Roe, an analyst at Roe Equity Research LLC.

The results show Verizon weathering the price battles with T-Mobile US Inc. and Sprint Corp., which seek to woo away its customers with offers like free video streaming and $1-a-month iPhones.

Verizon’s average revenue per account was $148.30, lower than the $150.25 analysts had predicted. Still, the company commands a premium price for its service: A typical family of four can share 18 gigabytes of data for $180 a month. By contrast, AT&T charges that same household $160 for 15 gigabytes, T-Mobile $140 for 24 gigabytes and Sprint $120 for 40 gigabytes.

Service Quality 

Verizon has advertised the quality of its wireless service for years, and that has sunk in, Chief Financial Officer Fran Shammo said in an interview Thursday.

The company is the industry’s top performer in overall quality, network reliability and speed, data and calling, according to a study by RootMetrics released in August. Verizon’s network was second only in text messaging, behind AT&T.

“If you ask anyone, they will say Verizon has the best network and that’s really our foundation,” Shammo said. “Customers have a lot of choices, and when they find out the experience isn’t the same with other carriers, they come back to us.”

To be sure, the New York-based carrier’s subscriber gains are about 30 percent less than a year earlier, the effects of a slowing wireless market in the U.S., as most people who want a mobile phone already have one -- and get a dizzying amount of offers to switch carriers.

With T-Mobile having already announced better-than-expected subscriber figures for the fourth quarter, and analysts predicting Sprint will close 2015 with its first full-year of user gains, Verizon’s customer additions now put the spotlight on AT&T. The No. 2 U.S. carrier, which will post its results next Tuesday, may have added just 555,000 monthly subscribers in the quarter, a 35 percent drop from a year earlier, according to analysts.

Data Centers Sale

Shammo also confirmed a report by Reuters that Verizon has hired bankers to help sell its data center business. Verizon bought Terremark Worldwide Inc. for $1.3 billion five years ago to enter the data hosting and cloud services business. As those prospects faded and Verizon invested more areas like mobile video and advertising, the company decided to put the data centers business up for sale.

“If we don’t get a price that represents a value to shareholders, then we won’t do it,” Shammo said. “There have been no responses yet, but it is still early in the process.”

Shares of Verizon rose 2.9 percent to $45.70 at 11:51 a.m. in New York, compared with a 1 percent increase in the Standard & Poor’s 500 Index.

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