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Verizon Net-Add Gains Slow, Edge Expands In Q1

Bedminster, N.J. – Net new retail subscriber growth at Verizon Wireless slowed to 4.8 percent in the first quarter following three consecutive quarters of double-digit gains.

LTE tablet activations again drove retail net-add growth.

The carrier also reported growing adoption rates of its EDGE installment-billing plans, which rose to 39 percent of retail postpaid phone activations in the quarter, up from the fourth-quarter’s 25 percent. The current rate is approaching 50 percent and will be about 50 percent in the second quarter, said EVP/CFO Fran Shammo.

Edge reduces Verizon’s SG&A expenses because it lowers commissions for indirect channels, Shammo said. Commissions were larger with subsidized phones because “we refunded [subsidies] to indirects,” he said.

EDGE activations in the quarter came to 3.4 million, bringing the EDGE base to 10 million, or 11.7 percent of the postpaid phone base.

Verizon will never get to 100 percent of the subscriber base, however, because the enterprise and business channels don’t’ participate in Edge, Shammo said.

As for net adds, although the carrier gained 565,000 net postpaid retail subscribers, the gain came from 820,000 net new LTE tablet subscribers, offsetting a drop in postpaid phone subscribers.

With tablet penetration at less than 10 percent of the company’s subscriber base, Verizon sees additional growth potential in LTE tablets, which generate additional data revenues and have lower churn rates, said Shammo.

Despite the retail postpaid gain, Verizon’s total retail net adds fell 31.3 percent to 377,000 because Verizon lost 188,000 retail prepaid subscribers. Shammo noted that Verizon’s prepaid pricing is higher than some competitors’ postpaid plans.

The company’s wireless operating revenues grew 6.9 percent to 22.3 billion compared to the year-ago quarter, and wireless operating income grew at 6.7 percent to $14.5 billion. Operating income margin held steady at 35 percent compared to the year-ago period but was up from the previous three quarters’ range of 23.5 percent to 32.5 percent.

Verizon does not report MVNO and M2M subscriptions, but it did say its telematics and Internet-of-Things revenues grew 25 percent in the quarter to $150 million.