By Mari Hansen Verizon has been the company that everyone believed was gradually losing ground for the majority of the past ten years. Consumers began to gravitate toward T-Mobile. AT&T improved its bundles. One disgruntled subscriber at a time, the old giant, fat and complacent, watched its base being peeled away by nimble rivals. The story wrote itself. Thus, there was a slight shock of disbelief in the way analysts discussed the first-quarter results when they were released in late April. 55,000 net postpaid phone customers were added by Verizon. Wall Street was expecting to lose about 88,000. Really, the whole story lies in the distance between those two figures.
When the results were released on Monday, shares surged 3.7% to $48.08, while the S&P 500 remained unchanged. That particular detail is important. When businesses follow expectations, markets don’t change much. When the script breaks, they move. The first positive first-quarter postpaid figure since 2013, when the iPhone 5 was released and converged broadband bundles were unheard of, was a broken script. During that time, Verizon also attracted 341,000 wireless and fiber broadband customers—a figure that subtly eats into cable’s lunch without a press release.
Strangely, Verizon didn’t say much about any of this. One Wave7 Research analyst described the company as “eerily quiet” since the beginning of the year. Avoid making a big impression at the Mobile World Congress in Barcelona. Not many press releases. Dan Schulman, a sixty-seven-year-old former PayPal chief who was appointed CEO in October of last year with what appears to be a rescue mandate, kept hinting at a “value proposition” that he would not elaborate on. He stated, “We are not going to show our hand until the day we launch,” during an earnings call. Longtime industry observer Roger Entner told Fierce Network that everyone was “waiting with bated breath.” A company of that size using silence as a tactic seems almost theatrical.
However, there is no mystery surrounding the mechanics of the surprise. Offering better terms to customers who came in with an AT&T or T-Mobile bill in hand and piecing together discounted bundles of broadband and wireless to make leaving feel pricey, Verizon put a lot of effort into the unglamorous task of stealing customers from competitors. It’s not innovation, but trench warfare. According to New Street Research, the outcome demonstrated that Schulman “is here to fight tooth and nail.” Investors now appear to trust him. The company increased guidance on postpaid additions toward the upper half of its range and pushed its full-year profit forecast up to between $4.95 and $4.99 per share.
However, interpreting this as a clear victory would be incorrect. Over the course of three years, Verizon has lost over 2.25 million customers, and the turnaround is based on a foundation that is still shaky in some areas. The network lost the title of “best network” to T-Mobile in the 5G era. The tower-builders’ association has requested that the FCC intervene in a simmering contractor dispute over what it describes as unsustainable pricing pressure. Additionally, the company quietly increased the price of its Unlimited Ultimate plan by $5 in early May, with a price-lock guarantee that, in the fine print, only truly protects current customers, despite Schulman’s pledge to stop raising prices “without corresponding value.” It’s difficult to break old habits.
The larger shape of this is difficult to ignore. It was assumed that telecom’s established players wouldn’t be able to retaliate quickly enough, so cable companies spent years pushing into wireless through agreements with the major carriers. This quarter makes it more difficult. Verizon’s ability to maintain a turnaround based primarily on aggressive promotions and bundled discounts is still up in the air. These strategies have the potential to quietly reduce margins while gaining new customers. However, the company that no one anticipated winning managed to avoid losing for at least one quarter. As this plays out, it seems like there are more rounds left in the wireless versus cable battle than anyone had anticipated.