Verizon battles for growth amid price hikes and fixed wireless expansion

As wireless earnings season begins, analysts will find out whether bundles and steep handset discounts were enough to shield the industry from inflationary pressures and sustain strong subscriber growth in the third quarter.

Inflation continued to rise, leading to more discriminatory consumer spending on certain products and services. The core consumer price index rose 6.6% from September 2021, the largest annual increase since August 1982, the Bureau of Labor Statistics reported on Oct. 13. However, the price paid by customers for wireless decreased by 1.1% during this one-year period.

So far, carriers have been able to maintain momentum through device subsidies. They’ve also created premium service bundles, with additional lines and content packages, that customers are willing to pay for, said Lynnette Luna, an analyst at Kagan, a media research group at S&P Global. Market intelligence.

“Carriers have continued to do a good job of offering deep smartphone discounts to attract users,” Luna said. This helped them avoid “any dramatic price drop for the actual service,” Luna said.

Competition and churn

An excellent example of a premium service package can be seen from Verizon Communications Inc. telecom spear a new prepaid wireless brand, Total by Verizon, in September. 21. While monthly plans start at $30, Total’s most premium plan costs $60 per month and includes a Walt Disney Co. Disney+ subscription, 5G Ultra Wideband access, unlimited calls, texts and data, 20GB of hotspot data and international calls and texts to 69 countries.

Total follows the July launch of Verizon’s Welcome Unlimited plan. The offer starts at $30 per line per month for four lines and includes free six-month trials of Disney+, Apple Music from Apple Inc., and a choice of game subscriptions.

The offers come as Verizon seeks to retain its leading position in the market. Although the overall wireless market remains robust, Verizon reported only 12,000 net postpaid phone additions in the second quarter and a loss of 36,000 in the first quarter. As for the third quarter, the company expects to post losses in wireless telephony.

Additionally, Verizon lost its distribution. The number of Verizon stores fell from 7,079 in November 2019 to 6,438 in November 2021 and 6,390 in May 2022, equivalent to a recent average of eight net store closings per month, according to data from the research firm. wireless Wave7 research.

“On the consumer side, we’re still going to have negative net adds on phones in the third quarter, but it’s clear we’ll have some improvement,” Verizon Chairman and CEO Hans Vestberg said during a presentation. at a Goldman Sachs investor event. in September.

Vestberg attributed the higher churn in the third quarter to price hikes announced in late June, which saw monthly customer bills rise by as much as $12.

“With the price increases, we’re going to have a churn bubble in the third quarter on the consumer side because that’s how it works,” Vestberg said, adding that the price increases were nonetheless “a financially right and healthy in order to continue to grow our cash flow.”

Fixed Wireless Extension

Despite a decline in the number of stores and wireless subscribers, Verizon has been aggressive in its fixed wireless expansion strategy. Revenue from its fixed wireless business will support an overall revenue increase for the quarter, Kagan’s Luna said. The The company aims to cover at least 175 million people with its 5G Ultra Wideband network by the end of 2022.

“We’ll likely see a nice increase in revenue as fixed wireless access grows and existing wireless customers take advantage of the steep discount for fixed wireless access service,” Luna said. “Fixed wireless and mobile wireless now become attractive bundles.”

Beyond Verizon, T-Mobile US Inc. is also poised to grow into fixed wireless.

After reporting 1.5 million fixed wireless home Internet customers at the end of the second quarter, T-Mobile hopes to reach 7 to 8 million fixed wireless subscribers by 2025.

“As you saw in the second quarter results, we’re on the right track,” T-Mobile Chairman and CEO Mike Sievert said at the Goldman Sachs investor conference.

Faster, cheaper

As for T-Mobile’s 5G wireless service, the company was recently recognized by wireless analyst group Opensignal Ltd. as the global 5G winner for availability and range. Opensignal reported that 5G users on T-Mobile’s network spent the highest proportion of time with an active 5G connection, and they also found a 5G signal in the highest proportion of locations. T-Mobile saw a 98.9% improvement in 5G download speed between the first half of 2021 and 2022.

“We’ve won the scale and capacity game. We’re the clearly demonstrated leader in 5G,” Sievert said.

T-Mobile reported 723,000 postpaid phone net additions in the second quarter and 589,000 in the first quarter.

AT&T Inc. is also offering customers faster download speeds through the deployment of key midband spectrum, according to Opensignal. The analytics firm said AT&T users’ 5G download speeds have increased 34.5% since March, from 50 Mbps to 67.3 Mbps in September.

“AT&T has made significant progress in rolling out its midrange 5G services, but it still lags behind T-Mobile and Verizon,” the report said. “Compared to them, AT&T relies heavily on low-band spectrum to provide 5G connectivity to its subscribers.”

AT&T reported 813,000 postpaid phone net additions in the second quarter and 691,000 in the first quarter.

While some analysts have attributed AT&T’s growth to phone discounts, AT&T President and CEO John Stankey said the promotions are only part of the story.

“I know people want to keep going back and saying, well, it’s a high level of promotion doing it, and that’s actually not okay,” Stankey said at the event. Goldman Sachs. “I think we have a winning combination when it comes to distribution. I think we’ve seen our network improve significantly. I think we have a better performing workforce than we’ve ever had in this moment…and so I think really well in our ability to handle that momentum.”

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