Verizon’s business continues to see many positives despite macroeconomic headwinds and an uptick in COVID cases.
- The good:
- Fixed wireless access continues to scale: Verizon grew FWA new adds by 32%. The company now has over 700,000 FWA subscribers. Big potential here. First, revenues are 2x – 2.5x higher than smartphone revenues. Verizon can add its FWA offering to other services including mobile wireless, wireline, unified communication services, IoT capabilities, and security. Much of the subscriber growth is coming from the public sector where Verizon remains dominant and is tougher for competitors to attack. There are also considerable net adds coming from constructions sites, hospitality mobile applications (think food trucks and other mobile business’), and other mobile sites. This is an area difficult for incumbent cable broadband providers to compete with Verizon. Verizon’s goal of one million FWA business customers could be conservative once C-Band eclipses 250 million POPs.
- 5G / C-Band continues to roll out despite inflation and other macroeconomic headwinds: Verizon has 135 million POPs covered by C-Band and this will grow to 175 million by year-end. Where C-Band has rolled out, data usage is up 233%. mmWave traffic is up 49% YoY. With a mobile base of high-end customers, this translates into larger unlimited service plan opportunities. 100MHz channels are being added and eventually Verizon will have the mid-band (C-Band) speed brags back.
- Verizon is holding its B2B lead: Verizon owns about 45% of mobile B2B subscribers. Verizon transitioned its organization three years ago splitting business units and consumer units. This has allowed Verizon to cater to B2B needs which are different than consumers’ core needs. Verizon also holds a significant lead with 5G rollouts covering stadiums, concert halls, airports, and other dense urban areas. Private networking contracts continue to be added. One high profile example is Associated British Ports. Business spend, to date, remains strong. The need for secure, seamless connectivity is safe from some of the gloomy outlooks.
- With its acquisition of Tracfone, Verizon has a hedge if the bottom 1/3 of the market gains during uncertain economic times: To date, this has not been the case. Prepaid to postpaid migration continues at record levels. However, if the economy does turn recessionary, Verizon now has a huge channel within the Tracfone brand and Walmart to help weather the storm.
- Verizon continues to hold onto a significant premium smartphone base: Verizon continues to hold a dominant role in winning over premium subscribers and holding onto its premium base with its mix and match service offerings. In addition, postpaid phone churn remains extremely low at .81%. Counterpoint Research’s North America Channel Share Tracker shows Verizon channels sold 27% of the US market’s Samsung Galaxy 21 and Apple iPhone 13 variants during the quarter—a very good showing.
- Verizon remains the most powerful smartphone buying force in the US market: It sold over eight million smartphones during the quarter. It is enticing the base to upgrade and stay on Verizon — 5.6% of the consumer postpaid base upgraded during the quarter. (For complete model level sales insights contact info@counterpointresearch.com.) Average revenue per account also climbed as the company did a nice job moving the base to higher data buckets.
Source: Verizon
- The bad:
- The consumer mobile space was weak: Verizon lost 215,000 high value consumer smartphone subscribers (note, Verizon added 227,000 business phone subscribers). By contrast, AT&T added over 813,000 phone subscribers (both business and consumer combined). Verizon raised prices which was one partial cause for the consumer weakness. However, AT&T was able to make small price increases and net additions were very strong. In addition to AT&T, Verizon is seeing competition on all fronts—the incumbent carriers, cable players who have added wireless services, and other low-end prepaid offerings. With increased inflation, the premium Verizon consumers pay was exposed. Verizon expected the inflationary costs could be partially pushed to consumers with price hikes and this was a miscalculation.
- There is no cost-effective way to move Tracfone subscribers over to the Verizon network: As noted, Tracfone is a hedge if the economy continues to sour. There is a negative to the Tracfone purchase, too. Verizon is in a race to convert its Tracfone base over to the Verizon network from AT&T and T-Mobile. Many need new handsets. It will take 12 to 24 months to complete this migration and, thus far, churn has been considerable. The low-end needs scale to make sense and Verizon will want to woo over as many of these 23 million plus subscribers as possible.
- The outlook:
- Verizon cut its 2022 revenue guidance: Likely, the fierce competition will continue to pinch Verizon in 2022. The company will have to hold onto as many subscribers and play defense until its C-Band is fully or nearly fully deployed. Extending mmWave coverage will also help. Verizon will then potentially have some network speed and coverage advantages again. Shorter-term, FWA remains a significant bright spot.
