Verizon Q2 Preview: Impact Of Unlimited Plans In Focus

by Trefis Team
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Verizon (NYSE:VZ) , the largest U.S. wireless carrier, is expected to publish its Q2’17 earnings on July 27, reporting on a quarter that saw significant competitive activity in the postpaid space, with unlimited plans largely becoming the norm in the market. Below, we take a look at two key factors that we will be watching when Verizon publishes earnings.

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ARPU Will Be A Key Factor To Watch

Around February, Verizon and AT&T reintroduced their unlimited data plans for mainstream customers, marking a reversal of sorts from their push to get subscribers to pay for data based on actual usage. The move could effectively put a ceiling on ARPU for high-spending customers, who were on more expensive tiered plans previously, while limiting high-margin overage fees that are charged when customers exceed their monthly quotas. While wireless ARPUs have generally been trending lower, they appear to have seen their sharpest declines after Verizon and AT&T – the two carriers with the most high value customers – re-introduced unlimited plans. For instance, the consumer price index for wireless services in the U.S. declined by close to 9% over March and April alone. As this marks the first full quarter since Verizon’s unlimited plans have been available, we will closely be watching the impact on the carrier’s postpaid ARPU.

Competition May Impact Subscriber Adds 

Verizon lost a net of 307k retail postpaid connections during Q1 2017, including 289k phone losses. While there is a possibility that the unlimited plans could help Verizon better retain subscribers, and add some new customers over Q2, competition has also mounted. For instance, the smaller two players T-Mobile and Sprint ran promotions that were targeted squarely at Verizon’s customers during the last quarter. Sprint’s limited time promotion in June offered Verizon customers a year of free unlimited data and voice service if they switched to its network. T-Mobile ran a promotion offering to pay the full balance of device payments and early termination fees for iPhone or Google Pixel users who have been on the Verizon network for over 60 days. These offerings could hurt Verizon’s churn figures, while pressuring it to eventually run costly promos of its own. Competition for subscribers could mount in the near-term, as carriers strive to maximize their revenues by getting more subscribers on to their networks, as per-subscriber revenues are potentially capped on account of unlimited plans.

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