Verizon loses more customers in Q3 after price hikes

Verizon Chairman and CEO Hans Vestberg warned during an investor conference last month that the company’s wireless postpaid net adds would likely still be on the decline when it came time to report third-quarter 2022 results.

That proved the case in the consumer division, where it lost 189,000 customers in the July through September period after plan and fee hikes. But Verizon’s consumer division losses were offset by the business side, where it added 197,000 customers, ending the quarter with a total of 8,000 postpaid phone net adds.

That compares to a strong showing by rival AT&T, which on Thursday reported adding 708,000 postpaid phone customers in the third quarter. T-Mobile reports third Q3 results on October 27.

Verizon shares fell more than 5% this morning, to $34.88, after the company reported that profits fell 23%, to $5 billion. Bloomberg said the shares were at the lowest level since September 2011, noting the stock has declined 29% this year through Thursday’s close.

During Friday’s earnings call with analysts, Vestberg reiterated that they’re on the correct path to right the ship. “The actions we have taken are showing progress, but there is more work to be done,” Vestberg told analysts in prepared remarks. “I’m confident that we are well positioned to deliver.”

Verizon’s churn was 0.88% in wireless retail postpaid phones during the third quarter compared with 0.67% in the third quarter of 2021.

Clearly, the hikes in price plans and fees the company implemented earlier this year are causing people to switch to other service providers. CFO Matt Ellis said the pricing actions affected more than 75 million phone customers, so the uptick in churn in the quarter was highly expected.

“But the financial benefits came through as well, which was exactly as we expected,” Ellis said.

Wireless service revenue was up 10%, to $18.8 billion. Overall revenue was up 4%, to $34.2 billion.  

He also said the company has started a new cost-savings program where it expects to reduce expenses by $2 billion to $3 billion by 2025.

The program focuses on several areas, including digitalization efforts to enhance the customer experience and streamlining internal operations through automation and “process enhancements,” Ellis said. He didn't say anything about laying people off.

Verizon actually saw more store traffic in the third quarter compared to the second quarter – up by double digits, Vestberg said. They tied that to the Welcome Unlimited plan, which was introduced in July and drew customers into stores.

Certainly, some of the people who visited stores bought the Welcome plan, but it also gave store associates a chance to talk to more customers about all of its plans. A good number saw the Welcome pricing but purchased a mix and match plan as well, Ellis said.

When it comes to customers paying their bills on time, Vestberg told CNBC that the company is actually better off than it was pre-Covid, with consumers paying their bills in a timely manner. Roaming is back to normal levels, with people now traveling abroad, he said.

In the business segment, Verizon has seen five consecutive quarters of wireless growth, including in government, enterprise and small and medium-sized businesses. But others are reporting upticks in the business segment as well, including at AT&T and T-Mobile, so Vestberg was asked about the source of the growth.

Vestberg said it’s not secondary lines that are driving the growth; it’s more businesses converting to wireless. “These are normal lines” that are coming in, he said.

Here are some other bullet points from Verizon's earnings report:

  • It’s accelerating its C-band network build, with plans on track to reach 200 million POPs within the first quarter 2023.
  • The consumer division ended the third quarter with nearly 53% of its postpaid wireless phone customers having 5G-capable devices.
  • The company reported 39,000 wireless retail prepaid net additions in the third quarter as TracFone reported positive net additions for the first time since the first quarter of 2021.
  • Capital expenditures year-to-date were $15.8 billion, including C-Band spending of $4.5 billion.