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Jan. 27, 2010

Verizon Wireless reports that its mobile services division added over 2.21 million new subscribers to its network during the fourth quarter. This is an 79.6 percent improvement compared with the 1.25 million new customers it added during the fourth quarter of 2008.

Verizon says that most of that increase was through resale partners as the wireless carrier’s retail customer growth inched up only slightly year-over-year to 1.234 million new customers.

Verizon Wireless has resale partnerships with a number of companies, including Tracfone Wireless and it also powers Tracfone’s recently launched Straight Talk wireless service.

Overall customer 'churn rate' increased only slightly during the quarter from 1.36 percent in 2008 to 1.41 percent last year, while retail churn, including direct prepaid churn, saw a greater increase from 1.35 percent in 2008 to about 1.45 percent last year.

Verizon Wireless, which has a history of touting its reliance on direct postpaid customer growth, added that it has the most direct customers in the industry, with 87.6 million at the end of 2009, and remains the wireless industry’s largest operator with over 91.2 million customers.

ARPU (average revenue per user) also took a hit as direct service revenue dropped 2.3 percent year-over-year to about $50.74.

Overall, data services enjoyed a better than 16 percent growth in ARPU to $16.26 and accounted for a little over 31.8 percent of customer ARPU during the quarter.

Both AT&T and Verizon Wireless recently introduced new rate plans that cut the price of unlimited voice calling from $100 per month to $70 per month, but now requires customers with 3G feature phones to select a data package beginning at $10 per month or with a smartphone to select a data package that runs $30 per month.

For the 4th quarter, wireless services accounted for about 57.9 percent of Verizon’s $27.1 billion in revenues and a little under 57.7 percent of the company’s $107.8 billion in revenue for 2009.

Julien Blin, principal analyst and CEO of JBB Research says “we continue to believe that Verizon’s data ARPU is still feeling the impact of the challenging macro environment, especially on the business side. But Verizon’s recent introduction of cheaper unlimited data plans should boost Verizon’s data ARPU growth in the upcoming quarters.”

Verizon Wireless' new prepaid calling plans introduced recently are at a monthly rate $5 above what it charges for post-paid customers who sign a contract. It is asking $75 per month for prepaid unlimited calls.

This is more than what low-cost mobile operators such as MetroPCS Communications and Leap Wireless are charging, a sign Verizon is not necessarily interested in getting in a price competition in that specific segment.

AT&T's and Verizon's pricing cuts will most likely trigger similar price cuts with most of its rivals. It will be interesting to see how Sprint, MetroPCS and Boost Mobile will react to this in the coming week.

Some wireless industry analysts already think they will follow in the steps of Verizon and AT&T and offer a very similar pricing strategy.

Verizon Wireless is a joint venture between Verizon Communications Inc. of New York and Britain's Vodafone Group PLC in London.

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Source: Verizon Wireless.