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Verizon Wireless' New Wireless Plan Focused on Longer-term Cash Flow Stability
Published on:
According to Fitch Ratings, Verizon Wireless' new price plans for sharing data are expected to encourage additional uptake of multiple data devices. In particular, operators hope shared data plans will increase the attachment rates for tablets which have been lower than desired by giving consumers more flexibility with their data consumption.
The pricing for the unlimited text and voice plans also locks in value for services that would further erode due to cheaper substitutes. Data revenue for the first-quarter 2012 at Verizon Wireless, AT&T Wireless, and T-Mobile USA grew 19% year over year to $14.2 billion. This represents 41% of service revenue compared with 36% one year ago.
The new pricing structure taken by the industry leader is a disciplined pricing action that could create more cash flow stability longer term within the wireless industry. Fitch expects AT&T Wireless will likely adopt a similar, less aggressive strategy focused on subscribers paying for the value of added data services. This is based in part on AT&T's current lower-priced tiered data strategy versus Verizon's higher priced data plans.
The rest of the wireless industry will be able to differentiate more on price, variety, value-enhancing services, and/or size of 'data buckets.' However, profitability will remain lower due to scale, pricing power, and high device subsidies, particularly with the iPhone.
The full 16 page report is here (free registration may be required).
Tags: [verizon wireless] [USA]
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