Price Cuts and Aggressive Promotion Threatening Verizon Communications Inc. (NYSE:VZ) Long Term Prospects


Dallas, Texas 07/23/2015 (Financialstrend) – Price cuts and aggressive promotion campaigns are taking a toll on Verizon Communications Inc. (NYSE:VZ), as its customer growth continues to slow. The company added one million new net retail customers in the quarter but still fell short of levels achieved last year.  Slow growth, in this case, is a reflection of the competitive environment in the wireless space as smaller upstarts become more aggressive.

 Competition Threat

T-Mobile US Inc (NYSE:TMUS) and Sprint Corp (NYSE:S) are ramping up efforts in terms of competition consequently picking up more customers that in the past ended up on Verizon’s network.  The Two are also offering attractive deals with a view of attracting more customers forcing Verizon Communications Inc. (NYSE:VZ) to do so but with concerns that the same could hurt its bottom line.

Verizon Communications Inc. (NYSE:VZ)’s prepaid business was a disappointment last quarter having registered declines as T-Mobile and Sprint continued to make gains.  Price cutting by rivals has forced the giant wireless company to offer more discounts as it tries to maintain a firm hold of its customer base. The giant wireless company has since revised its sales growth expectation to 3% down from an initial guidance of 4% as the threat of competition remains real.

 Customer Changing Trends

A slowdown in sales could be as a result of more customers opting for phone financing a move that results in the shifting of more revenues from sales categories to equipment. Sales could also come under pressure as customers opt for lower priced service plans. T-Mobile is also mounting more pressure on Verizon having unveiled a $120-a month plan that comes with 10 gigabytes. The plan is intended to compete with Verizon Communications Inc. (NYSE:VZ)’s family plans.

Growth in subscribers for the FIOS video service was also a disappointment, Verizon Communications Inc. (NYSE:VZ) having added only half as many customers compared to the previous year. Aggressive promotional activity from Comcast Corporation (NASDAQ:CMCSA) and Time Warner Inc (NYSE:TWX) is believed to have played a key role on the slowdown in this unit.

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