A lot more Verizon Wireless (VZ) customers finally have a chance to benefit from the ongoing mobile price wars and reduce their bills, but they may need to pick up the phone or hit the company's web site to grab the best deals.
Rampant price cutting in the mobile market has been a huge boon to consumers. T-Mobile (TMUS) got things started almost two years ago with lower monthly rates and, slowly, the competition has followed. Until now, especially at Verizon and AT&T (T), much of the benefit has gone to those willing to switch providers, as many deals were offered only to new customers.
That’s started to change in recent months as Verizon's latest price cuts are becoming available to millions of existing customers. For example, last week, Verizon cut $10 per month off the price of its 1 GB, 2 GB, 3 GB and 4 GB plans. Existing customers can qualify but the cuts don't go into effect automatically. To get a discount, consumers have to call customer service, visit a store or change their account online. The offer is termed a limited time promotion, so the cuts may not be available in a few months.
Verizon says the cuts aren’t automatic because it wants to offer customers a choice of taking more data at the same price instead of sticking with the same amount at a lower price. "We won't automatically migrate customers to promos because they may decide to do something different," says spokesman David Samberg.
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Of course, opting for more data also has a softer impact on Verizon's bottom line, since no revenue is lost if a customer is convinced to pay the same monthly price.
The company is also extending discounts for customers who decide to pay for a new phone on the company's installment plan, known as Edge. Instead of paying only $199 for a new iPhone 6, for example, and signing a two-year contract, a customer pays full price for the phone split across 24 monthly installments of $27. In return for giving up the phone subsidy that's built into the $199 price, the customer also pays less for monthly service.
That monthly discount will now be $25 if the customer buys at least 6 GB of data, a level that previously required a 10 GB or greater plan. Customers buying at least 4 GB of data get a $15 monthly discount on Edge plans.
In November, Verizon began offering discounts to its existing customers, but concentrated on data plans of 10 GB and up.
Verizon's cuts follow a somewhat tumultuous fourth quarter, when the company's churn rate — the percentage of customers who left — hit 1.14% for typical monthly accounts, up from 0.96% a year earlier. Overall, Verizon still gained 2 million customers in the quarter, since more new people signed up than left.
Competition can’t be ignored
As the country's largest mobile carrier, Verizon had long tried to stay above the fray even as the smaller carriers cut prices. But competition has gotten increasingly fierce. Sprint (S) ran a commercial during the Super Bowl comparing Verizon and AT&T to a bleating goat and a donkey as it offered to cut bills in half for customers who defect from its two larger rivals.
"Verizon is being dragged kicking and screaming into this new marketplace reality," says telecommunications analyst Jeff Kagan. "Either they offer discounts like AT&T, Sprint and T-Mobile or they will lose business. That must be where they are today.”
Verizon's strategy is to keep hold of customers who sign up for the larger data plans and who are less worried about saving money. "There’s going to be certain customers who leave us for price and we’re just not going to compete with that because it doesn't make financial sense for us to do that," CFO Fred Shammo told analysts on the company's last earnings call.
Some customers won't have to wait to get discounts under Shammo's strategy, however. Verizon will reach out to what Shammo called "high-risk, high-value accounts." Some get calls from a customer service rep, others a text message. "You can now get an extra 1 GB of data for the same price you pay now," said a text one customer received. "Would like to move to this new plan? If so, reply YES.”
Jeff Seigle, a Verizon customer for over 10 years, got a price cut and more data. In a phone call in December, a customer representative offered a $10-a-month price cut for his family plan along with an increased data allowance to 10 GB from 8 GB. "I was expecting them to try to upsell me the next tier, but he surprised me,” Seigle said.
With so much pressure from competitors, it seems it's a whole new world for Verizon customers.
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