What Are the Trends in Verizon’s Postpaid Phone Net Additions?



Verizon’s postpaid phone net additions in 3Q16

In the previous part, we discussed how Sprint (S) and T-Mobile (TMUS) gained a chunk of postpaid phone subscribers, which had a negative impact on Verizon’s (VZ) wireless segment operating margin in 3Q16. Postpaid phone users, especially smartphone users, are of particular value for mobile carriers. Users of smartphones such as Google’s (GOOG) Android or Apple’s (AAPL) iPhone tend to have relatively high data usage, and thus they are the most lucrative customers for telecom companies.

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About 60% of Verizon’s postpaid phone customers are now on an unsubsidized pricing plan. In 3Q16 for the first time ever, Verizon lost 36,000 net postpaid phone subscribers. Verizon added 357,000 4G LTE smartphones to its postpaid base, which was partially offset by a net decline of basic phones and 3G devices. The postpaid phone losses were a surprise to most. New unlimited data plans from competitors, the Samsung Note 7 total recall, and the iPhone 7 backlog were some of the headwinds to gross adds, while phone churn remained low at 0.9% for the last six consecutive quarters.

Verizon’s peer comparison of postpaid phone net additions in 3Q16

In 3Q16, AT&T (T) lost 268,000 postpaid phone subscribers. However, postpaid phone net additions by Sprint and T-Mobile were 347,000 and 851,000, respectively, which came at the expense of Verizon and AT&T. For Verizon, the subscriber loss could have been even more had the company not announced changes to its overage policy. Verizon said that over 7 million customers moved to the safe mode plan to avoid overage charges. The company also allowed users to carry over unutilized data for the month to the next month.

Continue to the next part for a look at Verizon’s prepaid subscriber net additions.


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