Verizon pays price for losing network superiority

Communication firm’s stock down 29% in ’22

For Verizon Communications Inc. investors, 2022 can’t end fast enough. By the time the books close, the largest U.S. wireless carrier will have logged a third straight year of below-industry growth, going from first to last in mobile-subscriber gains.

“Verizon bungled 5G and lost its network leadership position,” said Roger Entner of Recon Analytics, a boutique advisory group.

Some investors worry Verizon will ignite a costly price war to win back market share, hurting all of the players as they continue to spend billions of dollars on network expansion and upgrades. The past few years have been marked by more stable industry pricing, record high margins and low customer churn.

This isn’t how the era of better, faster wireless service — known as 5G — was supposed to unfold for the No. 1 U.S. provider. Verizon headed into the decade with a reputation for the best network and service. But management was outflanked by T-Mobile U.S. Inc.’s rapid ascent in network quality, as well as lower prices, and out marketed by AT&T Inc.’s free phone giveaways.

“The Verizon brand was closely tied to its network prowess,” said Tammy Parker, an analyst with GlobalData, a consulting company. “But it’s difficult to pin down what exactly Verizon stands for now, and that’s a tremendous problem.”

The latest trouble erupted last week, when the head of Verizon’s consumer division departed. It’s the second time in a year that the chief of the company’s largest business got the boot. CEO Hans Vestberg is overseeing that operation for now.

Verizon shares reflect all that concern. The stock is down 29% this year and near an 11-year low. That compares with an 19% drop for the S&P 500 in 2022. No. 2 T-Mobile is up 20% while AT&T, the No. 3 player, is down over 1% after unwinding years of investments in media and pay-TV businesses and refocusing on phone service.

Next year looks challenging, too. Analysts expect Verizon revenue to rise 1% in 2023, trailing T-Mobile again.

The good news for Verizon is it’s still No. 1 by a wide margin, with 120 million regular monthly customers, compared with more than 90 million for T-Mobile and almost 84 million for AT&T. As the company builds out its 5G network, it can remind consumers about its record of superior coverage and reliability.