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Verizon bleeds lucrative customers despite new data plan

Verizon lost hundreds of thousands of customers in the first three months of the year despite resurrecting its unlimited data plan.

The largest US mobile carrier that powers more than 100m US mobile devices said it lost 307,000 postpaid phone subscribers in the first quarter. Analysts had expected Verizon to add about 200,000 postpaid, or monthly, subscribers, which are viewed as the most lucrative wireless customers. 

Analysts had already pared back expectations on fears that an industry-wide price war would eat into profits. Verizon in February relaunched an unlimited data plan to combat customer defections. T-Mobile USA and Sprint have been winning new customers by offering generous deals with unlimited data plans, appealing to people who watch videos on their mobile phones. 

Verizon on Thursday said the return of the unlimited data offer, which it scrapped five years ago, had prevented even steeper customer losses. The company signed up 109,000 new subscribers after launching the offer.

The New York-based company’s net income fell to $3.45bn, down from $4.31bn last time. It reported earnings of 84 cents per share on $29.8bn in revenue, down from $1.06 per share a year ago. On an adjusted basis, earnings per share was 95 cents, just shy of analyst forecasts for 96 cents.

Shares in Verizon fell 2 per cent in morning trading, and are down a tenth this year. 

Its results underscored the cut-throat competition in the US telecommunications sector, building the case for consolidation to insulate from a bruising price war, analysts said. “We continue to believe that the company needs a strategic transaction to support their wireless business for the long-term,” said Jonathan Chaplin from New Street Research, noting that customer defections were “far worse than expected”. 

Lowell McAdam, chief executive, said on Tuesday that Verizon was open to deals with large media companies such as Comcast, Disney or CBS. “If Brian [Roberts] came knocking on the door, I’d have a discussion with him,” said Mr McAdam, referring to the chief executive of Comcast, the largest US cable group. 

Matt Ellis, Verizon chief financial officer, reiterated that position on Thursday’s earnings call. “We’re always looking at opportunities,” Mr Ellis said. However he cautioned that Mr McAdam’s comments were “a little bit taken out of context”. 

“Lowell was asked a question in an interview about if a certain company called and wanted to talk, would he take that meeting,” said Mr Ellis. “And he responded: sure.”

US telecoms and cable companies are looking to fend off disruption from tech groups such as Netflix and younger rivals such as T-Mobile, which has added about 3m customers a year through aggressive promotions. AT&T, the second-largest US wireless provider, has looked to dealmaking as a solution to shrinking wireless revenues, through an $85bn takeover of Time Warner

Investors are betting on a flurry of consolidation for the telecoms sector in a more lenient Trump regulatory environment.

A “quiet period”, in which wireless groups are banned from talking to each other during a government airwaves auction, ends April 27, allowing for discussions to resume. Verizon, fresh from its revised deal to buy Yahoo, has been linked with cable company Charter. 

Via FT