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Verizon's Earnings Jump, But Policies Draw Ire

Verizon Wireless rakes in customers' cash while facing pressure to drop contracts, which it has made even more restrictive.

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Verizon Communications reported its first-quarter earnings Thursday, and revealed that its wireless business is moving forward like gangbusters. Verizon Wireless, which is a joint venture between Verizon Communications and Vodafone, reported impressive customer growth of 720,000 net additions during the first quarter of 2013. Verizon activated 7.2 million smartphones, 4 million of which were Apple iPhones. Half of the iPhones activated were the LTE-capable iPhone 5.

At the end of the first quarter, smartphones accounted for more than 61% of Verizon Wireless' postpaid customer phone base, which is up from 58% at the end of the fourth quarter of 2012.

Verizon continues to migrate customers to its LTE network, and much of the company's quarterly success was based on its 4G service. For example, Verizon activated 5.9 million LTE devices in the first quarter. Its total number of LTE subscribers has reached 26.3 million, which represents 28% of its post-paid subscribers. Further, Verizon's LTE 4G network has expanded to 491 markets around the country, which blankets 287 million Americans with LTE. Verizon's LTE footprint has reached 95% of its existing 3G footprint, and will be complete by this summer.

[ Verizon recently won a consumer survey. Read Wireless Carrier Rankings: AT&T Vs. Verizon. ]

Revenue generated by just the wireless business reached $19.5 billion during the first quarter, up 6.8% year-over-year. Verizon Communications, wireless and landline businesses together, enjoyed net earnings of $6.2 billion, up 19.8% compared to the year-ago period.

"Verizon is firing on all cylinders," said Roger Entner, lead analyst and founder of Recon Analytics. "In an increasingly saturated market, the company is accelerating subscriber, revenue and profit growth. The ShareEverything plan is being received enthusiastically by consumers. FiOS [Verizon's bundled Internet, telephone, and television service] continues to make inroads in the Internet and video markets taking away share from the cable companies."

But not everyone is happy about Verizon's success.

Nearly 90,000 people have signed a petition started at requesting that Verizon Wireless drop its two-year smartphone contract model.

"Getting rid of carrier contracts is a win for customers," wrote petition author Mike Beauchamp. "Verizon's CEO, Lowell McAdam, has already expressed his willingness to do away with them if consumers speak loud enough about it. So here's your chance: sign this petition to tell Verizon to end carrier contracts and create an affordable way for consumers to purchase their devices." Beauchamp points to the no-contract model recently adopted by T-Mobile USA. The nation's fourth-largest carrier no longer requires contracts.

Verizon has yet to respond in any official capacity to Beauchamp's petition, but it recently enacted a new policy that's headed in the opposite direction.

Verizon now requires all customers to wait a full two years between device upgrades. Previously, customers on contract could enjoy discounted device pricing after completing 20 months of their 24-month contract. The new policy means Verizon gets to rake in an extra four months of cash for that particular contract before the customer re-signs to get a lowered device price. Verizon points out that customers can buy new gear any time they want to -- as long as they don't mind paying full price. Full-price smartphones often cost more than $600.

Verizon on Thursday fielded a lot of cranky questions during its earnings call about the new policy. It remained steadfast in its decision. With policies such as this in place, it's no wonder Verizon earns so much money.

InformationWeek is conducting a survey to determine the types of measures and policies IT is taking to ensure the security of the full range of mobile assets on cellular, Wi-Fi and other wireless technologies. Take the InformationWeek 2013 Mobile Security Survey today. Survey ends April 19.

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User Rank: Apprentice
5/17/2013 | 10:05:21 PM
re: Verizon's Earnings Jump, But Policies Draw Ire
Good article. I've been searching the web for info on not only Verizon business model but also it's pay policies in regards to its employess. I live in a town with a Verizon call center. It's the largest employer in our county. I have family that works there. The pay scale is what is called ABC Pay. Reps never make less than mininum wage and can make upwards of $13 p/hour. Pay is based on the After Call Survey. Which means, customer gets a survey call after calling into to *611. They are asked to rate the rep on a scale of 1-10 and then asking if their "issue was resolved". If the customer says, "no", then pay drops for the rep. Has anyone ever heard of such a thing? Like I said, I've been searching the web and can't find any information on this. I find it a very strange way of paying employees...especially in regards to the policies Verizon comes up with that piss everyone off - and the only pocket book it hurts is the low paid reps.
User Rank: Apprentice
4/18/2013 | 5:08:22 PM
re: Verizon's Earnings Jump, But Policies Draw Ire
I am switching away from Verizon as soon as my contracts expire. When they acquired Alltel they promised to honor all previous contracts, as long as you didn't change them. I had unlimited Alltel wireless internet service, which they discontinued. I got rid of their internet, and saved money for better service, with someone else. I will do the same with the two phones I have left under the Verizon contract within the next several months. They blew it with me, and I won't go back.
Tom Mariner
Tom Mariner,
User Rank: Strategist
4/18/2013 | 5:02:48 PM
re: Verizon's Earnings Jump, But Policies Draw Ire
Just remember that a little over four years ago Verizon had no smartphone offering -- the deal was AT&T and the iPhone. Their business model has dramatically changed and in spite of all of the consumer surveys there is little pressure for them to change. The lemmings, like me, seem willing to take a $300 to $400 discount, then pay $1,000 extra for the phone over two years until again fork over $200 (going toward $300) to the latest.

If Verizon deducts the fair amount paying for the phone from the contract and lets us pay full price as in Europe, the sales would plummet, their profit per phone would disappear, and we would all keep those phones longer unless a secondary market opened up on Ebay or someplace and Verizon the rest would fight that until their last dollar.
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