Verizon Wireless has largely stayed out of the pricing battle waged between AT&T and T-Mobile, but during its first quarter earnings call Thursday, it revealed it’s suffering a casualty or two as well. The country’s dominant carrier lost core phone customers in the first quarter of the year.
Verizon didn’t have a bad quarter by any means. It increased its customer base by 539,000 retail postpaid connections, down from its 720,000 net additions a year ago. But all of those new connections came from customers connecting 4G tablets to Verizon’s network. Verizon signed up 634,000 net new tablet connections, increasing its total base on connected slates by 15 percent in a single quarter, to 4.3 million devices.
Selling tablets certainly isn’t a bad thing, and Verizon chief financial officer Fran Shammo said it’s still a relatively untapped market for Verizon. But the lopsided growth in slates last quarter meant Verizon lost about 100,000 smartphone, feature phone or modem customers. Shammo acknowledged Verizon is seeing pressure in basic talk and text phones and low-end 3G smartphones, but he pointed out that Verizon is growing healthily in higher-end devices. Verizon added 866,000 new LTE smartphones to its network in the first quarter, and those pricier devices tend to produce higher-value customers who invest in bigger data plans.
Where are those low-end phone customers going? The obvious answer is T-Mobile, which has been hitting its competitors over the head with its Un-carrier pricing and promotional lures for the last year. But AT&T is also a likely destination.
AT&T has reacted much more directly to the T-Mobile threat, dropping its own pricing and — at least for a time – countering T-Mobile’s offer to pay customers to join its network. AT&T added 1 million net new subscribers in the first quarter. Smartphones only accounted for 311,000 of those new connections, but that’s still a lot more than Verizon.
Verizon Wireless now has 103 million retail customers, meaning customers who buy their service directly from Verizon via a prepaid or postpaid plan. Verizon didn’t reveal its overall total subscriptions, which would include wholesale connections.
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