Verizon adds 2M new connections, but customer turnover increases

At a high level, Verizon had a very good fourth quarter for customer growth. It brought on board an additional 2.07 million subscriptions, upgraded many old feature phone customers to new 4G smartphones and connected 1.4 million new tablets to its network. But there were also definite signs that Verizon’s formidable wireless citadel is showing weaknesses as competition from T-Mobile and a recently rejuvenated Sprint increases.

[company]Verizon[/company]’s churn rate was the highest its been in more than two years, hitting 1.39 percent. A carrier’s churn is the percentage of overall customers who leave each quarter. Carriers with a lot of prepaid and transient customers tend have a lot higher churn, but Verizon, with its huge focus on postpaid contracts and family plans, historically tends to have the lowest turnover rate in the industry.

Of particular note, Verizon’s fabled postpaid churn rate — usually below 1 percent – jumped to 1.14 percent, which represents about 1.16 million of Verizon’s most valuable contract and family plan customers abandoning ship.

Just because a churn rate is high doesn’t mean a carrier is shrinking. It just has to court new customers more aggressively. That’s exactly what Verizon did in the fourth quarter, luring customers over from other carriers and encouraging existing customers to connect more gadgets. But CFO Fran Shammo said Verizon was only prepared to be so aggressive. Many of those departing customers left because prices were cheaper at the competition, and Verizon isn’t willing to engage in price war, preferring instead to let those customers go, Shammo said at Verizon’s earnings call.

It looks like [company]T-Mobile[/company] was the primary beneficiary. It hasn’t reported earnings yet, but earlier this month it released its subscriber numbers for 2014, showing 2.1 million net new subscribers in Q4. [company]Sprint[/company] also saw 1 million new net customer additions in the last quarter. [company]AT&T[/company] hasn’t yet released its subscriber numbers for the quarter.

Verizon by no means is crumbling under the pressure of T-Mobile’s Uncarrier strategy, but an increasing churn rate is definitely something to keep an eye on. The last time Verizon’s postpaid churn rate popped up above 1 percent was in Q1 of 2014, when Verizon actually lost phone customers for the first time in recent memory.

Verizon ended 2014 with 108 million total postpaid and prepaid connections. Though Verizon reported profits for the full year of $2.42 per share, it suffered a loss in fourth quarter of $2.15 billion, or 54 cents a share.

During the company’s earnings call, Shammo was also asked about the possible threat of Google entering the carrier biz by becoming a mobile virtual network operator. The CFO didn’t seem too worried. He pointed out MVNOs have been around for 15 years with posing any huge threat to Verizon. Shammo has a point. By becoming a virtual operator, [company]Google[/company] would need the carriers to give it wholesale access to their networks. It’s difficult to challenge an industry when you’re entirely dependent on that industry to survive.

 

FreedomPop cobbles together a Wi-Fi network of 10M hotspots

FreedomPop started selling its own Wi-Fi-only phone last year, so it was only a matter of time before the mobile virtual network operator (MVNO) started selling Wi-Fi service. On Wednesday it will turn on access to a Wi-Fi network of 10 million hotspots and an unlimited voice, SMS and Wi-Fi data plan for $5 a month – quite a deal if you don’t mind cutting the tether to the cellular network completely.

The Wi-Fi network is actually owned and run by many different ISPs and hotspot aggregators, FreedomPop CEO Stephen Stokols told me in an interview, though he wouldn’t reveal the names of specific providers. He did, however, name specific examples of places FreedomPop Wi-Fi can found: [company]Starbucks[/company], [company]Burger King[/company], [company]McDonalds[/company] and [company]Panera Bread[/company] locations; [company]Walmart[/company] and [company]Home Depot[/company]; malls and outdoor hot zones in major metro markets.

So FreedomPop is obviously working with some of the biggest Wi-Fi aggregators in the country such as [company]Google[/company] and [company]AT&T[/company] as well as big ISPs like the cable operators, who run urban hotspot networks. Stokols did confirm that FreedomPop is not working with [company]Boingo[/company] so you’re probably not going to see FreedomPop’s Wi-Fi service in a lot of airports, but he said there is a deal with Devicescape in the making, which could add millions more crowdsourced hotspots from small businesses to FreedomPop’s network in the coming months.

To tie all of those different networks together, FreedomPop has developed an Android app (no word yet on iOS) that will act as a kind of skeleton key for those 10 million hotspots. The app will automatically log the device into the access point when they’re available and will establish secure links at hotspots that support encrypted connections. As more ISPs move adopt newer Hotspot 2.0 technology, FreedomPop will migrate its app to the new login technology as well, Stokols said.

FreedomPop won’t just be selling offering the service over its own tablets and phones. The company plans to use the network to expand beyond [company]Sprint[/company] devices — it currently resells Sprint’s 4G data services – to practically any device that has a Wi-Fi radio. Stokols said that there are millions of retired devices lying around people’s homes that no longer have cellular service from any of the major carriers. FreedomPop is offering to reconnect those devices through Wi-Fi. There’s also an opportunity to sell FreedomPop’s Wi-Fi access to prepaid phone users with limited data plans, Stokols said.

It’s safe to say that FreedomPop’s customers are already pretty comfortable with Wi-Fi. The virtual carrier’s baseline “freemium” service gives any customer 200 VoIP minutes, 500 text messages and 500 MB of 4G data at no charge, so customers naturally gravitate to their home, office and public Wi-Fi networks to augment their data usage. FreedomPop eventually plans to begin asking its customers to bring their own personal Wi-Fi routers into the fold, creating a crowdsourced network similar to Fon’s, Stokols said.

Sprint is growing again, adding 1M new connections

T-Mobile tried valiantly but it didn’t overtake Sprint as No. 3 U.S. mobile carrier in 2014. Sprint actually had a great holiday season, adding 967,000 net new mobile subscriptions to its network in its fiscal third quarter ending December 31.

Like [company]T-Mobile[/company], [company]Sprint[/company] reported its subscriber numbers ahead of its official earnings next month, and the new growth should put Sprint at 56 million total connections, 1 million more than T-Mobile. Sprint actually began its turnaround over the summer when Marcelo Claure took over from ousted CEO Dan Hesse. Claure launched a series of plan changes, new programs and discounts designed to make Sprint competitive again, including its most recent “cut your bill in half” promotion.

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In Sprint’s fiscal Q2, Sprint added 464,000 net new subscriptions, but all of that growth came from wholesale connections from its mobile virtual network operator (MVNO) customers. Those customers bring a fraction of the revenue of a full retail subscriber on a Sprint plan.

In the most recent quarter, wholesale was still a big driver, accounting for half of new connections, but Sprint saw growth across the board, including 30,000 net new postpaid customers. That’s not a huge number, but considering Sprint has been shedding these valuable postpaid customers for years, any growth in the segment is a positive. Sprint also added 410,000 new prepaid customers on its Boost Mobile and Virgin Mobile brands.

T-Mobile grew by 8.3M subscribers in 2014

T-Mobile’s customer growth spurt continued into the normally busy holiday season in 2014 as it added 2.1 million new connections to its ranks. It wasn’t T-Mobile’s best quarter of the year for subscriber growth – that would be its blockbuster Q1 – but it was a good way to cap off a very successful year.

Off the back of its evolving Uncarrier strategy, T-Mobile recruited 8.3 million net new subscribers to its ranks, the carrier revealed Wednesday ahead of its official earnings next announcement next month. In a single year T-Mobile grew its customer base by 18 percent, giving it a connection total of 55 million. At the end of Q3, Sprint had 55 million subscribers as well, so if Sprint continued its customer loss streak in Q4, T-Mobile will have assumed the mantle of the country’s third largest carrier.

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T-Mobile’s gains weren’t all due to Uncarrier, though. It added 1.3 million net new postpaid customers and 266,000 net new prepaid subscribers in the quarter, but the remaining 586,000 links were comprised of wholesale connections from mobile virtual network operators (MVNOs) like Ultra Mobile, Straight Talk and Target’s Brightspot, as well as from machine to machine connections linking the internet of things. Sprint used to be king of MVNOs, but T-Mobile has become much more aggressive in attracting virtual operator customers as of late.