Verizon Loses Contract Wireless Phone Customers for First Time as Competition Heats Up

By Ryan Knutson and Ben Fox Rubin 

Verizon Communications Inc. lost wireless customers for the first time early this year, as its rivals launched a bitter fight for new subscribers.

The country's largest wireless carrier said it lost roughly 138,000 net postpaid phone customers in the first quarter, a setback for a company that has steadily added subscribers in recent years.

Verizon made up for the loss in phone customers by adding 634,000 tablet users. But the resulting net addition of 539,000 postpaid customers was eclipsed by the 625,000 added by AT&T Inc., the first time Verizon has added fewer customers than its rival since 2010, when AT&T still had exclusive rights to the iPhone.

"To see Verizon actually losing phone customers is a shocking turnaround, " said Craig Moffett, an analyst at MoffettNathanson. "Verizon has been the growth leader of the industry every quarter since they got the iPhone."

Verizon began offering the iPhone in early 2011.

The loss of phone customers came as the company's first-quarter profit more than doubled to $3.95 billion, as revenue rose 4.8% to $30.8 billion. During the quarter, the company completed the $130 billion acquisition of the 45% of Verizon Wireless owned by joint-venture partner Vodafone Group PLC of the U.K.

Fran Shammo, Verizon's chief financial officer, said the company lost some smartphone users along with subscribers still carrying basic phones. The losses came primarily in January and February, and Verizon responded by cutting rates on some of its data plans by as much as 12.5%. Subscriber growth turned positive in March, Mr. Shammo said.

"It's really just a competitive marketplace," Mr. Shammo said. "We watch everything and respond accordingly."

Verizon rivals T-Mobile US Inc., AT&T and Sprint have all offered big payouts to customers who switch to their service from other carriers. Verizon hasn't responded as aggressively.

"You don't want to sacrifice the entire company just to reduce price," Mr. Shammo said, adding that Verizon doesn't plan further price adjustments.

At the end of the quarter, Verizon had 103.3 million retail wireless customers, up 4.4% from a year ago. Total postpaid churn, or the percentage of customers who left Verizon, was 1.07%, compared with 1.01% a year earlier.

In its FiOS business, which provides Internet and video services for residential and business customers, the company added 98,000 Internet and 57,000 video subscribers during the quarter. While AT&T and Google are building out their fiber services to new cities this year, Mr. Shammo said Verizon remains focused on increasing its market share in areas where it already has FiOS, rather than expanding into new areas.

FiOS additions dropped from a year ago owing to a price increase, greater competition from cable and bad weather, the CFO said.

Mr. Shammo said Verizon continues to migrate customers off copper connections and onto fiber, converting about 78,000 customers in the first quarter.

Write to Ryan Knutson at [e-mail] and Ben Fox Rubin at [e-mail]

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