Why Ver­i­zon has a de­cline in cel­lu­lar cus­tomers

The Washington Post - - THE WORLD - BY BRIAN FUNG brian.fung@wash­post.com

For the first time, the na­tion’s largest wire­less provider is los­ing cus­tomers faster than it can re­place them.

It’s a ma­jor mile­stone for Ver­i­zon, which on Thurs­day re­ported a net de­cline of 289,000 cell­phone sub­scribers over the past four months.

Even though Ver­i­zon usu­ally loses cel­lu­lar cus­tomers ev­ery quar­ter, it has his­tor­i­cally lured enough back to be able to re­port growth in that part of its busi­ness. But in re­cent months, hundreds of thou­sands of cus­tomers have de­fected to com­peti­tors in­clud­ing T-Mo­bile and Sprint, an­a­lysts re­port.

The sit­u­a­tion could have been even worse if Ver­i­zon hadn’t sud­denly rein­tro­duced un­lim­ited data plans in Fe­bru­ary, ac­cord­ing to Ver­i­zon’s earn­ings num­bers. In the first six weeks of the year, Ver­i­zon lost nearly 400,000 wire­less cus­tomers, ac­cord­ing to its lat­est earn­ings re­port. But once the new plans be­came avail­able, they helped blunt those losses by bring­ing in about 110,000 new sub­scribers, Ver­i­zon said.

Ver­i­zon’s re­luc­tance to bring back un­lim­ited data and its sud­den about-face this year re­flect ris­ing com­pe­ti­tion in the cel­lu­lar in­dus­try that is forc­ing large in­cum­bents to adapt. The tele­com gi­ant has long ar­gued that con­sumers are will­ing to pay a pre­mium for a high-qual­ity wire­less ex­pe­ri­ence, in con­trast to bud­get car­ri­ers such as Sprint.

But ag­gres­sive moves by smaller car­ri­ers to build out their net­works are pay­ing off, said Roger Ent­ner, an in­dus­try an­a­lyst with Re­con An­a­lyt­ics, mean­ing that such com­pa­nies as T-Mo­bile are chip­ping away at Ver­i­zon’s net­work ad­van­tage. In a re­cent fed­eral auc­tion of wire­less air­waves, T-Mo­bile emerged as a ma­jor ben­e­fi­ciary, spend­ing $8 bil­lion to ac­quire rights to ra­dio spec­trum it will use to ex­pand its mo­bile In­ter­net ca­pac­ity.

“At least three of the four na­tion­wide car­ri­ers [are] inch­ing closer to net­work parity in the ma­jor mar­kets,” Ent­ner said.

In ad­di­tion, fewer cus­tomers are choos­ing to leave the smaller car­ri­ers for Ver­i­zon or AT&T, Ent­ner said. This is im­por­tant be­cause in a mar­ket like the United States, there aren’t many new cus­tomers left; most peo­ple al­ready have cell ser­vice, and, as a re­sult, car­ri­ers have been forced to en­gage in price wars to poach sub­scribers from one an­other. Th­ese du­els have led to es­ca­lat­ing pro­mo­tions and com­pet­ing terms of ser­vice that re­duce cor­po­rate mar­gins — to the ben­e­fit of con­sumers.

Ver­i­zon’s losses un­der­score the ur­gency with which the com­pany must make that evo­lu­tion as it seeks to di­ver­sify be­yond its tra­di­tional role as a provider of con­nec­tiv­ity, said Jeff Ka­gan, an in­de­pen­dent tele­com an­a­lyst.

“This change in the mar­ket­place is a threat to both Ver­i­zon and AT&T,” he said. More at wash­ing­ton­post.com/ news/ the-switch

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