Verizon Buys Time as Unlimited Data Entices More SubscribersBy
Relieved investors send shares up the most since July
Largest U.S. wireless provider seeks new sources of revenue
The unlimited data plans Verizon Communications Inc. once shunned are now helping the phone giant buy time for its next move.
The all-you-can-use packages the largest U.S. wireless provider introduced this year led to a surge in subscribers for a second straight quarter. The increase gives Verizon more breathing room to create big new sources of revenue in media, advertising or connected cars as it struggles to maintain market share amid a price war. Relieved investors sent the shares up the most since July.
The telecommunications giant is aiming for a spring launch of a new online TV service that has been delayed at least twice, people familiar with the matter said, after settling on a strategy of delivering a sleeker version of cable programming over broadband. Deals that would reset the course of the company are still possible, though Chief Executive Officer Lowell McAdam said that he has “moved on” from looking at cable companies like Comcast Corp. and Charter Communications Inc.
Verizon added 603,000 regular monthly customers in the third quarter, more than analysts expected. The company had been reluctant to slug it out with smaller rivals with unlimited data plans, concerned they would threaten margins and network quality. But in order to keep video-hungry customers, Verizon broke down and introduced all-you-can-use package in February, which dramatically improved subscriber gains.
“We attribute the Verizon wireless strength to both their network advantage and the competitive landscape being leveled with everyone selling unlimited data,” Kevin Roe, an analyst with Roe Equity Research LLC, said in an email.
Verizon increased 1.9 percent to $49.59 at 11:15 a.m. in New York after reaching as high as $51.18, the biggest intraday gain since July 27. The shares had fallen 8.9 percent this year through Wednesday.
While Verizon has shared its plans for the spring online TV service with networks, the timing of the web-based service’s introduction remains tentative and could be further postponed, said the people, who asked not to be identified discussing private information. Getting the service to market has been a challenge. Staff shuffling, technology reboots and negotiations for streaming rights have bogged Verizon down, as has the news last month that media chief Marni Walden is stepping down.
In the absence of big deals, Verizon is focusing on building an online advertising business through Oath, a group of media assets acquired in the purchase of AOL Inc. and Yahoo! Inc. Verizon wants to challenge Google and Facebook in mobile advertising by building a big audience with streaming-video offerings like go90.
Third-quarter sales of $31.7 billion topped analysts’ estimates. Earnings, excluding some items, declined to 98 cents a share, matching expectations. Revenue from wireless service dropped to $15.8 billion, extending the decline to 11 straight quarters, the company said Thursday. The revenue did rise from the second quarter, the first sequential increase in three years.
Cord-cutting continues to take a toll on traditional pay TV providers. Verizon lost 18,000 FiOS video subscribers in the third quarter. That’s more than the 17,000 analysts predicted.
As price battles have shifted to unlimited data offerings, carriers have been dangling free service to entice new subscribers. T-Mobile US Inc. is offering customers free Netflix accounts while AT&T Inc. is giving away HBO with wireless and TV bundles.