Wireless Customer Growth Remains Strong at Verizon

Price cuts on unlimited wireless plans in mid-2019 drove strong customer growth at Verizon VZ during the fourth quarter, with modest pressure on average revenue per customer. The firm’s share of postpaid phone customer growth among the four major carriers was the highest it’s been in more than two years. The firm also defended its wireless network plans in the wake of recent reports that its performance has slipped relative to rivals and persistent concerns that it lacks the spectrum depth needed to maintain quality. We believe Verizon’s competitive position remains solid, built primarily on scale advantages. We also expect Verizon will make investments needed to maintain its strong reputation with customers, limiting returns on invested capital. We don’t expect to materially change our $58 fair value estimate, and we view the shares as fairly valued.

Verizon added 790,000 net retail postpaid phone customers, its best performance in six years. Customer defections (churn) have inched up slightly amid a more promotional competitive environment, but Verizon has also improved its standing with customers looking for a new carrier. The firm claimed roughly 35% of the gross postpaid phone customers added across the four national carriers, its best share in at least three years. As a trade-off, though, average revenue per account declined sequentially for the first time in 2019, dropping 0.7%, slightly worse than our expectation. Wireless service revenue increased 2.7% year over year, in line with the prior quarter.

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