Verizon Wireless may have lost some subscribers to T-Mobile and Sprint's competitive antics in the fourth quarter, but the carrier's CEO says it's left with the higher-quality customers the carrier wants to keep.
Churn was up in the fourth quarter from third quarter levels of 1% as customers were "moving back and forth to see if the claims are true," Verizon Communications Inc. (NYSE: VZ) CEO and Chairman Lowell McAdam said at the Citi conference Tuesday, referring to rampant new offers from T-Mobile US Inc. and Sprint Corp. (NYSE: S). (See Holiday Deals Squeeze Verizon's Q4 Wireless Margins.)
Even so, the Big Red boss said he's comfortable with the quality of the movement and the quality of the base Verizon with which is left. (See Verizon CEO: We Are Not a Content Company and Verizon CEO Denies AOL Acquisition Interest.)
"The ARPUs [average revenue per users] associated with customers coming in are higher than ARPUs of customers leaving," he said. "Our upgrades and retention efforts are very focused on individual accounts."
The carrier works to keep its high value, i.e. big spenders, around, McAdam said, but believes Verizon's network quality demands a premium, so is not interested in playing Sprint and T-Mobile's pricing games. It has responded to some market changes, like financing new handsets, but doesn't plan to reach the level of the "uncarrier." (See Sprint Drops Prices, But Also Speeds? and T-Mobile Customers Use the Most LTE Data.)
That’s also because the part of its customer base that isn't fleeing is upgrading phones -- nearly 10% did in the fourth quarter, more than the 9.5% expected to, he said. And, they are adding on additional devices. Verizon has seen devices per account go from 1.7 to "the high twos, approaching three devices" per account, McAdam said. As a result, the average revenue per account (ARPA, which Verizon now reports instead of ARPU) is also on the rise. As of the third quarter, ARPA was $161.24, up 3.5% from the previous year. (See Verizon: Multicast Is 'a Year Away'.)
McAdam expects the current number of "confusing" pricing offers in the industry to stabilize, but says competition will never decrease as "there will always be another offer." That said, he doesn't plan to join in the price wars in any meaningful way. Drawing an analogy between Southwest and United Airlines, he said he's comfortable with where Verizon fits in with his competitors, all of which are targeting different customers segments with different strategies.
"It's good thing for the industry that everyone is lining up and going after different segments," he said. "It's another factor for why we don’t need a lot of regulation in this industry."
Verizon reports its full fourth quarter earnings on Thursday, January 22. Check back to Light Reading for the full numbers and analysis then.
— Sarah Reedy, Senior Editor, Light Reading