While Verizon's first-quarter earnings remained steady, Big Red's wireless division may finally be feeling the effects of an increasingly competitive market.
Retail postpaid churn was up 6 basis points annually to 1.07 percent in the first quarter. Retail churn was 1.37 percent in the first quarter, up 7 basis points year over year. Meanwhile, Verizon Wireless added a lackluster 539,000 postpaid connections, a 20 percent drop when compared to the same quarter last year. Also notable is the fact that Verizon Wireless’ customer additions fell well short of its nearest competitor, AT&T, which added 625,000 postpaid connections in the first quarter.
In an earnings call, Verizon CFO Fran Shammo put the blame for the increase in churn partially on the basic phone customer base. He said that Verizon had identified the segment and tried to create opportunities to move them over to smartphones.
Overall, Shammo said Verizon had responded to competitive pressure exactly how he said it would in the company's fourth-quarter call, in a rational way that made sense for the business.
Specifically, Verizon lowered the price of its shared data plans to meet AT&T's 10GB Mobile Share plans. Verizon, like AT&T with Next, also saw increasing adoption of its Edge device financing program.
"This is a customer choice, this is not what I want," Shammo said of the Edge plans, stressing that both the subsidy model and the Edge program are profitable for Verizon.
Shammo estimated that the take rate on Edge was less than 15 percent on smartphone sales in the quarter, with less than 2 percent of all smartphone customers on the plans. He said he expected the take rate for the plans to double in the second quarter.
Competition aside, Verizon still managed to put up strong financials in the company’s first partial quarter as sole owner of Verizon Wireless after it purchased Vodafone’s 45 percent share of the joint venture.
The wireless side of the business saw total revenues of $20.9 billion in first-quarter, up 6.9 percent year over year. Service revenues in the quarter totaled $18.0 billion, up 7.5 percent year over year, while retail service revenues grew 6.7 percent annually to $17.2 billion.
Consolidated profits hit $3.95 billion, which was up annually from $1.95 billion. Verizon saw earnings of 84 cents per share but also provided adjusted earnings of 91 cents per share had it had full control of Verizon Wireless for the entire quarter.
Shares of Verizon were down 1.75 percent as of 10 a.m. EST to $46.60.