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Verizon Lost Its Network Superiority - Now It's Paying the Price


For Verizon investors, 2022 can’t end soon enough. By the time the books close, the largest U.S. mobile carrier will have posted a third straight year of growth below the industry, falling from first to last in terms of mobile subscriber gains.

“Verizon missed out on 5G and lost its position as the network leader,” said Roger Entner of Recon Analytics, an industry consulting group.

Some investors fear Verizon could start a costly price war to regain market share, hurting all players as it continues to spend billions of dollars on network expansion and upgrades. Recent years have seen more stable industry prices, record margins and low customer turnover.

That’s not how the era of better, faster wireless service – known as 5G – was supposed to play out for America’s leading provider. Verizon entered the decade with a reputation for being the best network and service. But management was overwhelmed by T-Mobile’s rapid rise in network quality, as well as falling prices, and overtaken by freebies from AT&T.

“The Verizon brand was closely tied to its networking prowess,” said Tammy Parker, analyst at GlobalData, a consulting firm. “But it’s hard to pinpoint exactly what Verizon currently stands for, and that’s a huge problem.”

The latest issue erupted recently when the head of Verizon’s consumer division left. It’s the second time in a year that the head of the company’s biggest company has been fired. CEO Hans Vestberg oversees this operation for the time being.

Verizon’s actions reflect all of this concern. The stock is near an 11-year low. Next year will also be difficult. Analysts expect Verizon’s revenue to grow 1% in 2023, again behind T-Mobile.

Vestberg, who took over from his outgoing consumer chief Manon Brouillette, is not shaking her hand, saying he will be guided by “what’s happening in the market.”

“There might be segments where it makes sense to raise prices,” Vestberg said at a UBS investor conference in New York on Dec. 5. “And there could also be areas where it makes sense to be more aggressive.”

The good news for Verizon is that it’s still number 1 by a wide margin, with 120 million regular monthly customers, compared to over 90 million for T-Mobile and nearly 84 million for AT&T. As the company grows its 5G network, it can remind consumers of its track record of superior coverage and reliability.

A Verizon spokesperson said Vestberg was unavailable to discuss company strategy.

The 57-year-old Swede joined Verizon in 2017 as head of network technology after more than 20 years at telecom equipment maker Ericsson, where he rose to CEO, then was kicked out in 2016 amid a downturn of growth. He became CEO of Verizon in 2018, focused on introducing 5G service.

However, the sale of Sprint in 2020 upset the status quo. With this acquisition, T-Mobile has gained some airwaves that have allowed management to grow crucial parts of its 5G network faster than either of its competitors.

Verizon also faces a reinvigorated AT&T. This company has started a rebound by focusing on expanding its network, adding subscribers and reducing debt.

Verizon, along with T-Mobile and AT&T, raised prices earlier this year to pass on rising labor and supply costs. Customers were willing to absorb the higher bills, showing how essential wireless service has become.

A price war is not in AT&T’s plans.

“What do you gain by lowering rates? COO Jeff McElfresh asked at the same UBS conference. “At what point do you stoop so far just to match someone else. Doesn’t sound like a winning strategy to me.

In his public comments, T-Mobile CEO Mike Sievert claims to have both the best network and the best prices. In reality, it’s too close to call. There’s no clear winner on network quality, and prices for unlimited plans by the big three all start at around $60 to $65 per month.

It’s not uncommon for each carrier to match the other’s free phone promotions and other benefits.

“There’s a kind of collusion going on in the industry,” said Stephen Stokols, executive vice president of Dish Network’s retail wireless division, which offers a low-cost $25 monthly mobile plan. “They each get their signals from the other.”

Turning Verizon around will be a challenge for Vestberg, who has never run a big consumer company.

This will involve more than a new pricing or advertising strategy. Accelerating customer sign-ups requires going back to what Verizon did well: improving the network, its reliability and the company’s message to consumers, Recon’s Entner said.

“It’s going to take strong leadership to break with what isn’t working,” Entner said. “Hans needs courage to do this.”



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