Verizon’s Reintroduction Of Unlimited Data Pays Off

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Verizon (NYSE:VZ), the largest U.S. wireless carrier, published its Q2 2017 results on Thursday, meeting expectations on earnings and beating revenue projections as it witnessed strong uptake for its unlimited data plans. The carrier’s revenues remained almost flat year-over-year at around $30.5 billion, while adjusted EPS grew by roughly 2% to $0.96.  Below we discuss the performance of the carrier’s postpaid business, which accounts for a bulk of its operating profitability.

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Verizon’s postpaid wireless operations performed well, adding a net of 358k postpaid phone users, amid a strong uptake of its unlimited data plans, which saw their first full quarter of availability over Q2. In comparison, the carrier posted its first-ever net loss of postpaid phone subscribers (289k losses) during the first quarter. The improvement over this quarter is noteworthy, as smaller rivals ran aggressive promotions that were targeted squarely at getting Verizon’s customers to switch. For example, Sprint offered Verizon customers a year of free unlimited data and voice service if they switched to its network, while T-Mobile offered to pay off the balance device payments and early termination fees of Verizon users if they ported out. The fact the Verizon was able to add subscribers and maintain its churn figures (postpaid churn was flat y-o-y at 0.94%), despite the competition and its higher pricing (Verizon’s unlimited plans start at $80, compared to $60 for some rivals) indicates that its subscribers are willing to pay a premium for its stronger network performance and coverage.

That said, the return of unlimited plans does appear to be having an impact on the carrier’s revenues. These plans put a ceiling on ARPU for high-spending subscribers who were on more expensive tiered plans previously, while limiting the high-margin overage fees that are charged when customers exceed their monthly data quotas. ARPU for the quarter, including equipment installment plan billings, fell by 1.5% year-over-year to about $165, while service revenues were down 6.7% to to $15.6 billion. That said, Verizon could partially offset this impact as more subscribers upgrade to its unlimited offerings.

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