Hello! And welcome to our Friday column, Worst of the Week. There’s a lot of nutty stuff that goes on in this industry, so this column is a chance for us at RCRWireless.com to rant and rave about whatever rubs us the wrong way. We hope you enjoy it!
And without further ado:
Regardless of one’s view on the competitiveness of the domestic wireless space, few would argue that the nation’s four largest operators are going through drastic changes in an attempt to grow, or at least maintain, their customers. These changes include ways to target new customer segments as well as trying to convince current customers to spend more money each month on their wireless service.
Perhaps you have seen a commercial or two … hundred?
Of the four largest carriers, Verizon Wireless seems to be most aloof as to this new mode of thinking. This aloofness, while a concern for some, seems at least grounded in the fact that customers continue to flock to Verizon Wireless, and that they are willing to pay handsomely for that privilege.
These facts were further highlighted this week with the release of Verizon Wireless fourth quarter financial results, which showed the carrier continuing to add a large number of high-value postpaid customers, maintaining a hold on the customers it has attracted and having those customers continue to pay a premium to remain a customer.
The numbers showed that of the 1.6 million direct net customer additions posted by Verizon Wireless during the fourth quarter, 1.5 million of them signed up for a two-year contract, while just 80,000 or so came out of a Verizon Wireless store without committing to a long-term deal. And it’s not like those customers signing on the line that is dotted are getting some screaming deal to make such a commitment. Sure, Verizon Wireless still offers the time-tested device subsidy for signing a contract and even provides a way to pay off the full price of a phone over a two-year period, but these tactics are nowhere near as “consumer friendly” as the offers being thrown around by rivals.
The best part is that Verizon is aware that these do not match up, and they don’t seem to care.
“Look on the Edge program as I said earlier we will respond where we think we need to respond,” noted Verizon Communications CFO Fran Shammo during the company’s fourth quarter conference call. “I’m not going to get into what others have done between Edge and subsidy. I mean we had a very successful fourth quarter and what we launched in the marketplace they were receptive to that. We ran a lot of promotions in the fourth quarter and it drove a lot of growth to our business and look, I mean again we will continue to do what we do best, which is we add customers and we are profitable.”
That last sentence says it all: “we add customers and we are profitable.”
Verizon Wireless noted that its average revenue per account had increased 7.6% year-over-year during the fourth quarter, with its average revenue per line growing from $55.76 in 2012 to $56.96 in 2013. This, in addition to the larger customer base, pushed revenues up more than 5%, which in combination with a drop in expenses boosted operating income by 30% to $6.2 billion for the latest quarter.
While T-Mobile US is also adding customers, it’s not adding customers willing to pay more for service. T-Mobile US reported earlier this month that it also added 1.6 million new customers during the fourth quarter, though just over half were direct customers signing up for one of the carrier’s device-related contracts. T-Mobile US has yet to announce complete fourth quarter results, but its monthly ARPU was down $5 year-over-year during the third quarter of 2013 and down $1.29 sequentially.
Not to downplay the difficulty in just adding customers (cough … Sprint … cough), but I would guess that it’s easier to add customers with cheaper prices as opposed to adding customers and then asking them to spend more.
I guess at some point Verizon Wireless will have to become more aggressive in enticing customers, but in the meantime their actions are fun to behold. It just seems that the carrier wears the arrogance so well that it’s not really annoying. You just have to sort of stand back and be amazed.
OK, enough of that.
Thanks for checking out this week’s Worst of the Week column. And now for some extras:
–Just when it seems like BlackBerry has something small to celebrate, the clouds roll in and rain on that parade. BlackBerry’s stock price spiked recently following “news” that about 80,000 BlackBerry devices were set to be activated by the U.S. Department of Defense this month. Yay for BlackBerry!
However, before they could clear the snow from the roads to host a parade, the news was clarified to show that there were no actual new orders for BlackBerry devices and instead said that it was already supporting those 80,000 BlackBerry devices.
Not sure how you say “buzz kill” in Canadian, but I think its starts with “BlackBerry.”
–Finally, Motorola has come to the rescue of all those would-be smartphone owners that have held out making the jump to super-phone heaven because they could not get a device made out of bamboo. Now, all those pandas have no excuse for not getting with the program.
I welcome your comments. Please send me an e-mail at dmeyer@rcrwireless.com.
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