Verizon mobile is one of the biggest telecommunication service providers in the US with a large customer base for both telecom and wireless services. The total net worth of this conglomerate in 2016 was $126 billion. For the first time, Verizon communications Inc has to cut down the rates for their wireless services in order to retain customers from leaving them. They are losing their customers to rival competitors like T-Mobile US Inc and Sprint corp. This reduction in charges had cost a hit in their net profits and Verizon has no option but to bear it in order to maintain their current standing in this competitive environment.
The net profits have declined by 5.1 percent to $20.9 billion in their wireless line of business. The company had to bring back their unlimited data plan which they stopped earlier in 2011 in order to fight back their competitors. This fall in net profits has forced the company to find alternatives to in order to recover losses suffered due to the introduction of these unlimited data plans in their wireless business. Analyst Craig Moffett rightly said in a research note that the Telecom sector has a lot of growth challenges due to a price war among the service providers in order to sustain in the market.
However, these price wars among the service providers are beneficial for the customer because he has access to different alternatives and there is a reduction in the overall expenses for these services. Wireless telephone bills are one of the critical and essential parts of the household expense and there is a shocking fall in the customer price index by 0.3 percent. When compared to the last year, wireless services fell by 11.4 percent and fell by 7 percent compared to last month.
Looking at the current market conditions, AT&T has diversified their line of business by acquiring DirecTV and planning to take over Time Warner Inc. The downfall for Verizon began with T-Mobile’s strategic decision to cancel the overage fees and to end the two-year contract. Now, this diverted the loyal customers of Verizon to start using T-Mobile services and Verizon lost 307,000 customers to their competitors. During the last three months, Verizon managed to earn net income of $3.45 billion which fell from $4.31 billion in 2016.
Verizon is positive about managing to increase their profits through the wireless services in the next quarter and would try to gain back their lost customers. But this seems to be very difficult with T-Mobile and Sprint Corp focusing on increasing their customer base rather than overall net income.
Daniel is acting editor of Talk Herald with over two years of experience in the field of online news under his belt. Daniel has worked with multiple media houses and is currently leading a team of journalists, sub-editors, and writers through his entrepreneurial endeavors.
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