Verizon pledges continued customer growth amid pricing increases

Verizon reported better-than-expected growth in its consumer smartphone business during the fourth quarter, despite implementing more than $1 billion in pricing increases during the course of last year.

And the company expects to continue those tactics – both raising prices and growing its customer base – during 2024.

"In the first quarter we are taking additional targeted pricing actions," Verizon CFO Tony Skiadas said Tuesday during Verizon's quarterly conference call with investors. He said those moves could impact Verizon's first quarter 2024 results, but that the company continues to expect to gain customers in its consumer business across the full year of 2024. That's important considering Verizon has been working to reignite growth in its consumer business throughout much of 2023.

According to Cnet, Verizon will raise prices on many of its top 5G service plans by as much as $4 per month per line starting in March. It's the operator's latest pricing increase in recent years, and it dovetails with similar price and fee hikes by rivals AT&T and T-Mobile.

Verizon's pricing actions coincide with the operator's ongoing cost-cutting program, which is set to remove $2-3 billion in annual expenses by 2025. Company officials said Verizon has cut spending in areas including IT infrastructure, fleet management and customer care, including by moving some customer service functions out of the US.

Related:Verizon's FWA base crosses 3M mark

Moreover, Verizon is also reducing its capital expenses (capex): In 2023, it spent $18.8 billion on capex, down from $23.1 billion in the prior year. In 2024, the company said its capex ought to fall further, to between $17 billion and $17.5 billion.

The moves are geared toward freeing up cash, and in that regard they've been successful. The company's total wireless service revenue reached $19.4 billion, up 3.2% year over year. And the company's overall free cash flow spiked from $14.1 billion in 2022 to $18.7 billion in 2023.

Investors have celebrated. Verizon's stock is up 10% since the beginning of 2024.

Exceeding expectations

Among consumer postpaid phone customers – considered the most valuable by investors – Verizon reported net additions of 318,000. That figure is far higher than what most analysts had expected.

But Verizon continues to struggle in the prepaid market, despite its recent purchase of prepaid giant TracFone. "We still have work to do but are making progress," CEO Hans Vestberg said of Verizon's efforts to stabilize its prepaid business.

Overall, Verizon reported average revenues per account in its consumer postpaid wireless business of $134 in the fourth quarter, a figure up 4.7% year-over-year. The rise was "driven by pricing actions implemented in recent quarters, the larger allocation of our administrative and telco recovery fees from Other revenue into Wireless service revenue, more customers selecting premium Unlimited plans, and an increase in our FWA [fixed wireless access] subscriber base," according to Verizon. Click here for more details on Verizon's FWA performance in its fourth quarter.

Importantly, Verizon officials said the company's massive investment into midband C-band spectrum for its 5G network is paying off. The company's CFO said growth among postpaid phone customers in the fourth quarter was 8% higher in markets where Verizon has lit up its C-band spectrum. And he said that the percentage of customers opting for Verizon's most expensive service plans was 10% higher in the operator's C-band markets.

The financial analysts at New Street Research predicted that Verizon's customer growth will dip in the first quarter, "but we would expect [customer] adds to be better year-over-year every quarter next year with a strong chance that they will be positive for the year. This is better than consensus expects," they wrote in a note to investors.

But the financial analysts at MoffettNathanson offered a more dour outlook: "Beyond the numbers, there is still the nagging concern that Verizon's value proposition, especially for consumers, is broken. The days of Verizon having the best network are seemingly over, especially in 5G. We often see comparisons of 5G network speeds, and they consistently highlight T-Mobile's advantage," they wrote in a note to investors.