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It might be safe to say during the first quarter of this year, the biggest wireless carrier in the United States should be able to acquire (or reacquire) subscribers through its recently launched unlimited data plan. What is less clear is whether that move should prove cost effective in the long run. And with the unlimited data wars sure to rage on in the next few months, will Verizon Wireless be able to continue to boast of its network as the critical difference in distancing itself from the rest of the competition?
By any measure, the Verizon Unlimited plan it debuted back in February earlier this year is quite a deal -- at $80 per month, it comes with unlimited voice calls, text messaging, and data for both new and current customers who avail of the automatic payment option. Sure, the plan features some restrictions (subscribers’ connection speeds may be throttled if they go beyond the 22 gigabytes of monthly data allowed), but unlike other unlimited deals out there, Verizon’s plan also comes with HD video streaming and up to 10 gigabytes of LTE hotspot access.
Joining the unlimited data wars is an interesting move by Verizon Wireless, considering that for so long, the industry leader has always been rather averse with the idea of offering unlimited plans. Back in September of last year, then chief financial officer Fran Shammo even stated that making money in unlimited video is basically impossible.
But the Big Red may have been forced to change its mind, especially in light of two straight years of losing subscribers during the first quarter, as observed by Walter Piecyk of BTIG Research. Piecyk, however, added that over the longer term, going unlimited may be ultimately costly for Verizon Wireless.
BTIG Research is projecting that the Verizon Unlimited data plan will cost the carrier $3 billion of value, or $0.75 a share. BTIG also raised its projections for the Big Red’s Q1 2017 postpaid net customer additions by 275,000, and its full year projections by 500,000, which would almost mark the break even point for this year. However, the firm reduced its projections for average revenue per user (ARPU) for postpaid for next year by $1, decreasing its 2018 service revenue projections by $677 million. Earlier this year, Verizon Wireless had forecasted that its mobile service revenue would not register growth in 2017. As for BTIG and other industry watchers, growth may not return until next year.
Experts from MoffettNathanson, however, think that this year’s unlimited data wars will hand Verizon Wireless a new opportunity to leverage its network, especially in a battleground where mobile connectivity is almost considered a commodity. Even though some view the Big Red’s network as something that is constrained by spectrum and at nearly full capacity, the wireless carrier itself believes that its network will do just fine. Instead of betting big on spectrum as the key to rising above the competition, Verizon seems to be putting more of its attention on small cells and network densification moving forward.
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