Will Verizon reverse its consumer losses in Q3?

Verizon has been steadily losing customers in its consumer business since the beginning of last year. But according to some analysts, the end might finally be in sight.

"New rate plans and C-band [5G network] deployment could help Verizon turn the corner," wrote the financial analysts at TD Cowen in a recent note to investors.

It's clearly an important topic to Verizon's new consumer CEO, Sowmyanarayan Sampath: "Step one for us is to get to positive phone net [customer] adds in the consumer business. Once we do that, we'll get to our fair share [of industry wide customer additions]," he said at a recent investor event, according to Seeking Alpha. "But we're going to have to work up through it. Step one is to get to positive phone net adds, which we are working hard on."

According to the financial analysts at New Street Research, Verizon ought to turn the corner in the fourth quarter of this year. The firm noted Verizon lost 263,000 consumer postpaid phone customers – widely considered the most valuable type of mobile customer – in the first quarter of this year. The company then narrowed those losses to 136,000 in the second quarter of this year.

The analysts predict those losses will shrink further in the third quarter of this year, to around 60,000. But the analysts believe the trend will reverse completely in the fourth quarter, with Verizon finally adding 49,000 new consumer postpaid phone customers.

Related:Will they come for Hans Vestberg?

That would bring an end to a long, trying time for the company.

Launching 5G, losing customers

The customer exodus in Verizon's consumer division took off at the beginning of 2022, when it lost 292,000 such customers. Although Verizon gained 256,000 business customers during the period, the result was an overall decline of 36,000 total postpaid phone customers (among both consumer and business customers). It was a tough result for the company, considering Verizon launched its speedy C-band midband 5G network during the first quarter of 2022 with a noisy ad campaign.

Since then Verizon has continued to shed customers in its consumer business (although those losses have been partially offset by growth among the operator's business customers). It's a noteworthy situation considering Verizon once dominated the US wireless industry during the 4G era.

To address the situation, Verizon CEO Hans Vestberg earlier this year moved Sampath from his position as CEO of Verizon's business unit and positioned him atop Verizon's consumer business unit.

"I've been very happy with the progress in the last couple of months," Sampath said at the investor event last month. He said the recent introduction of Verizon's new myPlan pricing plan ought to help boost the company's consumer business. He added that Verizon has also shifted to a more localized marketing approach, and that it has implemented a new incentive program for its sales force to chase growth among consumers.

Related:Verizon's CEO tries another management shakeup

"We've done a lot of transformation work over the last 100-odd days. And going forward, what we see is more momentum in our business," he said.

A shrinking, contested market

Verizon of course is facing stiffening competition in the consumer marketplace.

First, the number of new customers hitting the US wireless industry overall is starting to decline. Amid the COVID-19 pandemic, the industry collectively recorded almost 10 million new customers each year. But Sampath – as well as many other executives and analysts – believes that annual growth ought to eventually shrink to around 5 million to 6 million per year.

With fewer potential customers up for grabs – and more competition from the likes of cable companies – operators like Verizon may struggle to return to growth. "Subscriber additions are likely to be depressed the rest of the year," summarized the financial analysts at KeyBanc Capital Markets, of Verizon's prospects.

Indeed, the analysts at Evercore reported on new data showing declining interest in Verizon's brand among consumers. "Verizon has historically been positioned as the best network at a premium price. However, customer perception of Verizon's network advantage has dissipated over the past two and a half years while price is still the biggest pain point cited by Verizon customers. As a result, Verizon's NPS [net promoter score] has fallen from being the industry leader until mid-2022 to now slightly trailing the industry average," they wrote, citing data from HundredX's consumer survey database.

But the financial analysts at MoffettNathason offered a positive tone. In looking at data from Navi, a consumer-focused wireless marketplace that tracks interest in wireless service plans, they found Verizon's new iPhone promotions are encouraging customers to stick with the operator. "Verizon's offers are performing very, very well. T-Mobile's are not. AT&T's are somewhere in the middle," summarized the analysts.

Verizon is scheduled to report its third quarter 2022 results on October 24.