Verizon Looks To Improve Subscriber Adds With 4G Launch For Prepaid

+1.38%
Upside
41.96
Market
42.54
Trefis
VZ: Verizon logo
VZ
Verizon

Verizon‘s (NYSE:VZ) prepaid customers may soon be able to experience 4G speeds, according to popular technology website Droid Life. The carrier is likely to introduce 4G for its prepaid users as part of its Allset plans on July 17. [1] It was apprehensive in offering 4G to its prepaid users earlier, likely because it was concerned about cannibalizing its relatively costlier postpaid plans. However, the company seems to have changed its earlier stance due to rising competition and declining net subscriber adds.

Verizon is currently the only major carrier in the U.S. which does not offer 4G services to its prepaid users, and this is acting as a major disincentive for prepaid customers when opting for the carrier’s service. This was reflected in the first quarter this year when Verizon’s net prepaid user adds declined by 76% from the prior year quarter to 10,000, and net postpaid user adds declined over 20% to 539,000. This was the carrier’s worst performance in terms of subscriber net adds in the last two years. If the carrier expands its 4G service to prepaid subscribers, it could witness an improvement in net adds in the near term. However, with competition in the prepaid market heating up, Verizon will also have to keep its pricing at attractive levels to witness any significant gains.

We have a $50 price estimate for Verizon, which is in line with the current market price.

Relevant Articles
  1. Up 8% Year To Date As 5G Gains Traction, What’s Next For Verizon Stock?
  2. Up 25% Over The Last Three Months, Will Verizon See Further Gains Following Q4 Results?
  3. Down 50% From Covid Highs, Will Verizon Stock Recover Post Q3 Results?
  4. Will Verizon Stock Recover To Its Pre-Inflation Shock Highs?
  5. Verizon Stock Has Over 60% Upside If It Recovers To Its Pre-Inflation Shock Highs
  6. Will Verizon’s Postpaid Woes Continue In Q1?

See our complete analysis for Verizon

Will Prepaid Users Get XLTE ?

Verizon’s Allset prepaid plans start from $35 for feature phones and $45 for smartphones. The $45 plan features unlimited voice and text with 500 MB of 3G data, and it is expected that users will now have the option of accessing its 4G network as well. However, it remains to be seen whether the 4G on offer will be the carrier’s normal LTE or its upgraded XLTE. The company claims that the XLTE network can potentially be twice as fast as its existing 4G network, depending on user location. [2] It recently reported that its upgraded LTE network has now spread to more than 300 markets across the country. [3]

Carriers Focusing On Prepaid

With the high-end smartphone market largely saturated and postpaid subscriber growth slowing, the top four U.S. carrier are increasing their focus on the prepaid market. While some are looking to consolidate the prepaid market, others are adding popular smartphones to their prepaid lineup and revamping their pricing strategy to gain market share.

Over the past year, two big mergers have happened in the prepaid segment: AT&T’s acquisition of Leap and the T-Mobile/MetroPCS reverse-merger. Sprint also started offering the iPhone on its Boost prepaid platform late last year, having already introduced it on its other prepaid brand, Virgin Mobile, in mid-2012.

Verizon has traditionally focused more on postpaid and so far kept its prepaid plans 3G-only to avoid postpaid cannibalization but it tweaked its prepaid pricing strategy towards the end of last quarter to include lower data tiers and attract more prepaid subscribers. We expect its recent efforts to help the carrier slowly improve quarterly net adds in the prepaid segment and effectively compete with rivals. [4]

See More at TrefisView Interactive Institutional Research (Powered by Trefis)

Get Trefis Technology

Notes:
  1. Verizon Prepaid is Finally Getting 4G LTE, Likely on July 17, Droid-life.com, June 3 2014 []
  2. Press Release-Verizon, PRNewswire, May 19 2014 []
  3. Verizon resolves massive billing system outage, rolls out XLTE to 300-plus markets, Fierce Wireless, June 29, 2014 []
  4. Verizon cuts prepaid prices, data allotments with new ‘AllSet’ plans, Fierce Wireless, March 3, 2014 []