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5G

Verizon looking desperate amid latest pricing gambit

Verizon announced a new "Welcome Unlimited" service plan that essentially strips out some digital perks but also puts the company's entry-level pricing on more competitive footing with those of its rivals.

Broadly, the operator's latest pricing gambit could be seen as yet another signal that Verizon is struggling to maintain pace in a market that's becoming increasingly competitive amid new entries from the likes of Comcast, Charter Communicationsand Dish Network. Verizon reported relatively disastrous first-quarter results and is scheduled to post its second quarter results on July 22.

"I think Verizon will have a really difficult quarter again. It's pretty well known that their store traffic is very light. So if things go really poorly they might have a second really negative quarter in a row, which would be quite unprecedented," analyst Roger Entner, of Recon Analytics, said on his weekly podcast. "I don't remember Verizon losing two quarters in a row."

The financial analysts at Cowen recently warned that "we see downside risk near term [on Verizon] given continued weakness in its consumer business despite more aggressive marketing/promos." In a recent note to investors, the analysts said they expect Verizon to report around 275,000 postpaid net phone customer additions during the second quarter, a figure far below their expectations for AT&T and T-Mobile.

The Cowen analysts aren't alone. "It is astonishing to us that the consensus for Verizon's postpaid phone net additions is still over 900,000 for 2022," wrote the financial analysts at LightShed Partners in a recent post (registration required). "We estimate it will struggle to generate half that estimate."

Verizon is also selling fixed wireless Internet services. (Source: Verizon)
Verizon is also selling fixed wireless Internet services.
(Source: Verizon)

Verizon reported the loss of 36,000 postpaid phone customers during its first quarter, whereas its big mobile rivals, T-Mobile and AT&T, reported significant gains.

Welcoming unlimited price cuts

Thus, Verizon's latest pricing strategy could be viewed as an attempt by the operator to juice its performance as it enters the third quarter of 2022. As noted by Cnet, the operator's new Welcome Unlimited pricing plan offers one line of service for $65 per month, a $5 per month reduction from the operator's existing "Start" unlimited plan, previously its cheapest unlimited plan.

Verizon's new low-price unlimited plan is also particularly noteworthy in light of the recent introduction of T-Mobile's "Base Essentials" unlimited plan, its least expensive unlimited offering, which costs $45 per month for one line of service. Similarly, AT&T recently introduced its own "Value Plus Plan" that goes for $50 per month for one line of unlimited service.

However, Verizon's new Welcome Unlimited plan does cement the operator's 5G profit strategy. The plan does not include access to Verizon's "ultra wideband" 5G service that runs on its highband millimeter wave (mmWave) and midband C-band spectrum, and instead only provides access to Verizon's lowband "5G Nationwide" network. Verizon's lowband 5G offerings aren't much faster than its 4G services, but its "ultra wideband" connections are twice as fast, or more.

Frank Boulben, the chief revenue officer of Verizon's Consumer Group, told Cnet that the carrier plans to continue with this two-tier network approach "for the foreseeable future."

Part of Verizon's 5G strategy involves encouraging existing customers to sign up for its more expensive, "premium" service plans. Around 33% of Verizon's unlimited plan customers subscribed to those kinds of plans at the end of 2021, and Verizon expects that number to rise to 70% by 2025. Both AT&T and T-Mobile have similar "step up" pricing strategies.

Finally, it's also worth noting that Verizon's new Welcome Unlimited pricing plan includes a strikingly complex set of caveats, though the provisions likely also highlight the offerings that Verizon considers important. For example, Verizon's Welcome Unlimited does not include hotspot capabilities, but it does provide discounts to teachers, first responders, military, veterans and nurses. Further, the plan does not include access to Disney+ or Hulu streaming video services, but it does provide a discount to customers who also sign up for Verizon's fixed wireless Internet service.

Verizon's new offering comes just weeks after the operator raised its service prices. That move is intended to increase Verizon's earnings by close to $1 billion during 2022, though some analysts believe Verizon will need to raise prices further to reach its financial targets.

Verizon's shares rose slightly in trading Tuesday after it introduced its latest service plan.

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

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