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 Shares of Verizon were down nearly 3 percent at midday on Thursday,
making it the biggest percentage loser among Dow Jones industrial
average component stocks.
While its rivals have engaged in aggressive discounting, Verizon has
been more conservative in price cuts in an attempt to preserve
revenue per user at the expense of subscriber adds.
"Verizon and AT&T have solid networks but their price premium is so
large that it is going to be very hard for everyone to have their
cake and eat it too," said Craig Moffett, a senior analyst at MoffettNathanson.
"They will have to sacrifice growth or margin going forward and the
market is coming to precisely that realization," he said.
The company has targeted its device installment plans and discounts
at its high-data customers, prompting some low-end subscribers to
switch carriers.
"We've built our brand on a superior network. We are not going to be
the low-cost provider in the marketplace," Verizon's chief financial
officer, Fran Shammo, told Reuters.
"Not every subscriber is equal," he said. "We will take our time and
respond where we need to respond. We will attack the quality base of
customers that we are targeting."
The company's wireless business added 539,000 postpaid subscribers
in the quarter, 20 percent less than in the year-ago quarter, while
No. 2 carrier AT&T Inc added 625,000 subscribers, blowing past Wall
Street expectations.
Analysts say that as the industry leader, Verizon is looking to
maintain its premium price point as a sign of a superior product
even at the expense of additional subscribers.
"It is very easy in this industry to lower prices, but it is almost
impossible to raise them," said Roger Enter of Recon Analytics.
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"They are rightfully cautious about not jumping head-on into what
could be a price war," he said.
Excluding unusual items, Verizon's earnings per share of 84 cents
fell short of Wall Street expectations of 87 cents per share.
The No. 1 U.S. mobile provider earned $5.98 billion in the first
quarter, compared with $4.86 billion in the year-ago quarter.
On the wireline side, it said it added 57,000 FiOS video customers
and 98,000 net new FiOS Internet connections in the quarter.
The company said wireless customer defections, known in the industry
as churn, increased slightly from a year ago.
Revenue rose 4.8 percent, the highest growth rate in five quarters,
to $30.82 billion from $29.42 billion a year earlier. Wall Street
expected $30.698 billion, according to Thomson Reuters I/B/E/S.
Its February acquisition of Vodafone Group Plc's 45 percent share in
their prior joint venture for $130 billion gave the company access
to greater amounts of cash flow.
Verizon shares were down 2.6 percent at $46.18 on the New York Stock
Exchange at midday on Thursday.
(Editing by Matthew Lewis)
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