Verizon Defends Pricing Practices

Verizon Communications Inc. (NYSE: VZ) put a little bit of a scare into telco stocks last week when it ignited what many investors felt was a pricing war within the wireless business. (See Opposite Day.)

Speaking this morning at the Merrill Lynch & Co. Inc. Communication Services Forum, Verizon chairman and CEO Ivan Seidenberg defended the decision to offer an unlimited wireless voice plan for $99 per month.

"I don't think we have to chase price. We don't have to and we never have. We think our customers are going to look for a little more than just price," said Seidenberg, noting that his company's superior wireless network will allow Verizon to not lower its rates should another carrier undercut them in price.

"Until someone does something that proves that what we've done doesn't work, why would we do anything different? Once again, we were the first," he said, adding that Verizon made its pricing decision based on what it felt would be best for its customers and its business and not in reaction to what other carriers were doing.

Seidenberg also made comments on Verizon's devision to open its wireless network. (See Verizon Tears Down the 'Walled Garden' .) "It taps into a whole culture of innovation out there. I see it as a growth move all the way."

On the wireline side of the business, Seidenberg also defended Verizon's aggressive capital expenditures on FiOS that have cut into the company's profit margins. "Long term, we feel this will be our competitive differentiator," said Seidenberg. "I would suggest that in everything we've ever done, it leads to higher core growth. And sometimes it doesn't look that way. Capital leads to higher organic intrinsic growth rate."

Fellow RBOCs AT&T Inc. (NYSE: T) and Qwest Communications International Inc. (NYSE: Q) have been much more conservative with their spending on network upgrades but Seidenberg feels it is money everyone is eventually going to have to spend. "I think what we're spending, others are going to have to spend it anyway," said Seidenberg.

It of course wouldn't be an investor conference without questions coming up about the unstable U.S. economy. But as most telco operators have maintained, Seidenberg reiterated that things were still business as usual for Verizon.

"There's nothing new to report," said Seidenberg. "Everyone's waiting for the shoe to drop. We don't see it."

— Raymond McConville, Reporter, Light Reading