Verizon has always been the most expensive wireless service in the United States and the one with the most coverage. Being that Verizon does cover areas of the U.S. other carriers do not it was logical to them they could charge a premium. But as T-Mobile, AT&T and even Sprint continue to expand their network coverage and compete in pricing, users are opting to jump Verizon’s ship. This is resulting in losses for the company for the second straight quarter and shares have dropped as well down 2.6%. Chief Executive Lowell McAdam did acknowledge T-Mobile, AT&T and Sprint by saying the company is operating in “highly competitive markets.”
Verizon, which has been chasing revenue growth through acquisitions, in July said it would buy Yahoo Inc.’s Web assets for $4.83 billion in cash, ending a drawn-out process for the beleaguered internet company. For New York-based Verizon, the deal adds another piece to the digital media and advertising empire it is trying to build.
For the September period, Verizon said it added 442,000 net retail postpaid wireless subscribers, a 66% drop from the prior-year period. Postpaid churn, or the rate at which customers canceled service, rose 11 basis points to 1.04% from a year ago.
Revenue slipped 6.7% to $30.94 billion, below estimates for $31.09 billion, according to Thomson Reuters.
In all, Verizon posted a profit of $3.6 billion, or 89 cents a share, down from $4 billion, or 99 cents a share, a year earlier.
It’s easy to say that in order for the company to compete they should lower pricing to match the other carriers but they do still have their superior coverage map to fall back on. But that probably won’t last too much longer as the other carriers continue to expand into Verizon’s strongholds. Take T-Mobile for example. On a recent trip to Montana, T-Mobile’s LTE service was excellent through South Dakota where just a few years ago it was almost non-existent.
Verizon’s profits aren’t hurting but the long term strategy probably needs to be re-evaluated as other carriers start expanding their own network coverage while offering lower prices.
What do you think of these revenue hits? Let us know your thoughts and comments below or on Twitter, Facebook and Google+.Source: WSJ