As the second quarter comes to a close, a number of financial analysts believe Verizon's latest promotional offers will help it begin growing its customer base again – a noteworthy achievement given its first-quarter customer losses amid a rise in overall market competition.

However, some believe the operator's margins may suffer as a result.

"We expect Verizon to report total adjusted EBITDA [earnings before interest, taxes, depreciation, and amortization] margins of 36.5% vs. 37% last quarter and 37.9% a year ago," wrote the analysts at Cowen in a recent note to investors regarding the second quarter.

Nonetheless, the Cowen analysts expect Verizon to report the addition of 199,000 wireless postpaid phone customers in the second quarter.

Similarly, the financial analysts at Morgan Stanley also believe Verizon will return to customer growth. The analysts wrote in a recent note to investors that they expect Verizon to add a total of 207,000 new postpaid phone customers in the second quarter.

That would mark a reversal from the 178,000 wireless postpaid phone customers Verizon lost during the first quarter. Verizon and AT&T are scheduled to report their second quarter financial results later this month, while T-Mobile is expected to report its own second quarter results sometime in August.

Most analysts attributed their second-quarter predictions to Verizon's latest promotion: a free 5G smartphone to new and existing customers who subscribe to the carrier's more expensive unlimited plans.

"Verizon's strong June performance versus 2019 likely reflected their new 5G upgrade offer for existing customers, and syncs with other channel check data," wrote the Morgan Stanley analysts.

Extenuating circumstances

However, there are a wide range of other market factors that likely affected Verizon and its rivals during the second quarter.

First, it's unclear exactly how many customers were up for grabs among Verizon, AT&T, T-Mobile and other operators during the period. The first quarter featured a surprising amount of growth among virtually all operators, and some analysts expect that trend to continue through the second quarter.

"We expect the Big 3 [Verizon, AT&T and T-Mobile] to add 1.165 million postpaid phone customers this quarter, similar to the strong 1.190 million last quarter, as the industry continues to enjoy healthy subscriber momentum despite high penetration levels," wrote the Morgan Stanley analysts.

However, the firm warned that traffic to operators' retail stores may have slowed during the second quarter compared with the first quarter.

It's also unclear how Verizon's rivals might have stacked up against the operator's new promotional offer. AT&T has been offering a similar free phone promotion since last year, while T-Mobile has been pushing promotions around its own free 5G phones and Magenta Max service plans.

Another factor: how cable companies might have performed during the period. "We also raised our estimate for Comcast as Cable Mobile is hitting its stride bolstered by the new and improved Verizon MVNO deal and advantageous competitive position," wrote the analysts at Cowen. They pointed to Comcast's new family plans for its Xfinity Mobile service, which are likely underpinned by a new agreement between the cable operator and Verizon.

The Cowen analysts expect Comcast to add 250,000 more mobile customers during the second quarter. They expect Charter, via its Spectrum Mobile service, to add 315,000 new mobile customers, and Altice USA to add 10,000 new mobile customers.

Eye on churn

According to at least one analyst, operators may be starting to worry about keeping their existing customers amid all the competition.

"Carriers are more focused on base offers than on switcher offers," argued analyst Jeffrey Moore with Wave7 Research in a FierceWireless article. He wrote that operators have been increasingly selling lengthy service plans that include the cost of a smartphone, forcing customers to stick around for two or even three years before their phone is fully paid off. That, he argued, indicates operators like Verizon and AT&T want to make sure their customers can't easily switch to another provider anytime soon.

"Nirvana of low competition? Not quite," he wrote.

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— Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano