Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.
'There might be opportunities and pockets where we see we can get more value to our customers at the same time we increase the price,' said Verizon CEO Hans Vestberg. Others agree.
December 6, 2023
5G network operators in the US have been carefully raising prices and fees over the past year or so. And, based on some recent commentary, it seems like they'll continue that strategy into next year.
"I think there is more room" to raise prices, said AT&T CEO John Stankey this week at an investor event.
"There are a variety of different ways to go after it," he continued. "And I think what's important and what we've demonstrated at AT&T is, we can find ways to drive our relationship – to sustain a relationship with the customer, get them in a position where they see more value, get them comfortable with the fact they may be paying for that value that they're receiving, and do it in a way that doesn't disrupt our base."
Stankey wasn't the only wireless executive this week eyeing price increases.
"There might be opportunities and pockets where we see we can get more value to our customers at the same time we increase the price," said Verizon CEO Hans Vestberg at the same investor event. The question, he said, is "can we add more value to our customers that is a price increase, but they get more, and that is beneficial to our shareholders?"
"There are opportunities" to do so, he added. But he said Verizon isn't looking to increase prices as much as it did in 2022.
"We will look into it," he said.
Finally, T-Mobile's CEO Mike Sievert made similar comments this week. "There's also opportunities for us to optimize our cost structure and revenue structure here and there, and we take those opportunities if we think they'll be well accepted by customers," he explained at that same investor event.
But Sievert seemed more cautious on the topic, noting that T-Mobile will be "very planful and data-driven" and will "push and see what customers will accept."
That's not a surprise considering T-Mobile in October reportedly had planned a price increase on some of its older plans, but Sievert walked back that effort because the company discovered it wasn't "something that our customers are going to love."
Nickel and diming
Starting just over a year ago, Verizon, AT&T and T-Mobile began making rumblings that they might increase the cost of some plans and some fees.
AT&T kicked off the trend by increasing prices on customers subscribing to some older plans. But the issue picked up steam when Verizon announced it would raise prices – via "administration" fees – on all customers by between $1.30 and $2.20 per month. T-Mobile too increased some of its fees.
Since then the operators have continued raising prices and fees. For example, in July both Verizon and AT&T increased the cost of their legacy smartphone pricing plans by around $3 per line per month. "This increase will allow us to continue to deliver the great wireless service you expect," according to AT&T.
Why? The operators haven't managed to increase revenues despite spending billions of dollars on 5G spectrum and equipment. Rising inflation exacerbated the situation.
More importantly, the operators found they could raise prices without consequences. Meaning, customers simply swallowed the pricing increases without complaint and did not cancel their service to "churn" to another provider.
That situation has cheered investors. "We were encouraged to hear that recent rate plan adjustments from AT&T, T-Mobile and Verizon have not materially impacted existing customer churn and should be supportive of modestly growing ARPUs [average revenues per user] in 2024," wrote the financial analysts at Wells Fargo in a note to investors last month. "Even in an environment in which [customer] gross add / switcher activity remains more muted, the carriers' ability to continue to raise pricing across its entire base underpins our view that EBITDA [earnings before interest, taxes, depreciation, and amortization] and cash flow will grow across all of the Big 3 into 2024."
The reason customers are willing to pay more is simple: Smartphones are becoming a necessary part of modern American life.
"It's one of the most important devices you have in your hand, a phone," explained Verizon's Vestberg.
Editorial Director, 5G & Mobile Strategies, Light Reading
Based in Denver, Mike has covered the wireless industry as a journalist for almost two decades, first at RCR Wireless News and then at FierceWireless and recalls once writing a story about the transition from black and white to color screens on cell phones.
You May Also Like
Rethinking AIOPs — It's All About the DataMar 12, 2024
SCTE® LiveLearning for Professionals Webinar™ Series: Fiddling with Fixed WirelessMar 21, 2024
SCTE® LiveLearning for Professionals Webinar™ Series: Cable and 5G: The Odd Couple?Apr 18, 2024
SCTE® LiveLearning for Professionals Webinar™ Series: Delivering the DAA DifferenceMay 16, 2024