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What's Happening in the US Telecom Industry?

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Part 7
What's Happening in the US Telecom Industry? PART 7 OF 18

Is Verizon’s Unlimited Data Plan Helping or Hurting?

Customers show significant interest

A few weeks after reversing its stance and joining its peers in offering unlimited data plans, Verizon (VZ) claimed that the move was helping it win customers from other carriers. Speaking at the Deutsche Bank Investor Conference, Verizon’s executive vice president John Stratton said, “We did see significant interest,” and “migration has been very substantial,” in reference to subscribers ditching the likes of Sprint (S) and T-Mobile (TMUS) for Verizon’s network.

Is Verizon&#8217;s Unlimited Data Plan Helping or Hurting?

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Subscriber addition

Pacific Crest analysts made interesting observations in their survey of Verizon’s unlimited data plan move. They noted that activity on Verizon’s network increased soon after the company started offering unlimited data plans, suggesting the carrier was stealing subscribers from its rivals. As a result, analysts concluded Verizon would add 605,000 retail postpaid subscribers in 1Q17, up from their original estimate of 540,000 new retail postpaid customers. Verizon actually lost 307,000 retail postpaid subscribers in the quarter, but the loss would have been steeper if not for its unlimited data offering.

Impact on ARPU

But Verizon didn’t return to unlimited data plans willingly. It did it as a defensive reaction to AT&T (T), Sprint, and T-Mobile making the move. Verizon executives, including immediate former CFO Fran Shammo, repeatedly claimed that unlimited plans were an uneconomical strategy. Stratton highlighted the problem with unlimited plans when he spoke at the Deutsche Bank event, saying they expected the return to unlimited data to have a neutral impact on Verizon’s ARPU (average revenue per user).

What’s Verizon getting with the move?

At best, Verizon’s unlimited data plan move seems to be more about surviving competition than driving new growth. The carrier has spent billions of dollars (UUP) to enhance its network, and it needs to recoup the investment.

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