Verizon Communications said that the intense competition for mobile subscribers is weighing on its profit margins. The company said it is losing more customers to rivals this quarter than it lost last quarter or last year.
The nation’s largest wireless carrier will not release fourth-quarter earnings until Jan. 22, but is warning investors that promotions and discounts will impact its numbers. Verizon’s EBITDA margins have hovered just below 50% in recent quarters, and the company did not say how much margin deterioration it expects during the current quarter.
Mobile data discounts and device promotions are the two main tactics carriers have used this year to compete for new subscribers. Verizon jumped into the data price wars at the very beginning of the fourth quarter, doubling the amount of data offered at most price points within the carrier’s More Everything plans.
Although it is clearly not immune to the pressure of price wars, Verizon has traditionally chosen to compete on the speed, reach and reliability of its network rather than on price. For two years in a row, Verizon has earned the top spot in Root Metrics’ network performance analysis.
The fourth quarter is almost over, but a significant part of this quarter’s consumer spending on wireless devices will be driven by holiday purchases. For Verizon, this may not be the happiest of holidays.
“While we believe management is making the best of a difficult situation by locking in what it describes as ‘high-quality’ customers, we continue to expect the competitive environment to worsen before improving,” said analyst Colby Synesael of Cowen Research. Competition this month looks more intense than ever, thanks to Sprint’s latest offer to cut customers’ bills in half if they leave Verizon or AT&T Mobility for Sprint. In this environment, Verizon’s bean counters appear to think that the costs of acquiring new customers and keeping existing ones will be higher than in the past.
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