For years, AT&T and Verizon reigned supreme over smaller carriers like Sprint and T-Mobile, but now the underdogs are undermining the two biggest U.S. carriers with new customer-friendly policies and competitive price cuts. Although Verizon added millions of new customers in the fourth quarter of 2014, it also lost more than 1 percent of its old ones, and saw profit margins shrink.
Earlier in the year, Verizon warned investors that it might lose more customers and make less money due to pressure from competitors and the need for cut-throat promotions. It seems Big Red wasn’t wrong in its prediction. Its contract customer turnover rate increased by 18 basis points over the same time last year, and rose to 1.4 percent. While that doesn’t seem like much, one percent amounts to more than a million subscribers. Additionally, Verizon continues to lose more subscribers each quarter. Overall, the carrier posted a net loss of about $2.2 billion.
In spite of its losses, Verizon did add around 2.1 million subscribers in the fourth quarter, which is on par with its expectations. The majority of those new subscribers came from those taking advantage of tablet promotions, though, with 1.4 million new customers adding a tablet. Only 672,000 new subscribers added phones. In the long run, Verizon earns more money from phone owners.
Meanwhile, T-Mobile added the exact same number of subscribers as Verizon, with 2.1 million new customers in the fourth quarter. Sprint also added almost 1 million new customers in the same period.
Although it’s clear that Verizon is adding a good amount of new customers and still remains one of the top two U.S. carriers, its higher rate of customer loss appears to confirm that the competition is finally getting to Big Red. Even so, Verizon Chief Financial Officer Fran Shammo said the company won’t compromise its values to keep customers and it won’t copy others’ promotions.
“We did not go to places where we did not financially want to go to save a customer,” Shammo said. “And there’s going to be certain customers who leave us for price, and we are just not going to compete with that because it doesn’t make financial sense for us to do that.”
In other words, don’t expect any uncarrier moves from Verizon — at least not until its subscriber count starts to plummet in earnest.
