Verizon Confirms Tiered Pricing, Announces Lower Profits

Verizon confirmed during its third-quarter earnings call that it will offer tiered pricing, which along with the arrival of the iPhone could help the carrier bounce back.

Verizon Wireless saw third-quarter profits fall 25 percent and revenue drop almost 3 percent, in large part due to personnel issues surrounding layoffs and employee departures. However, company officials could see some help in the near future in the form of an expanded 4G network, a tiered-pricing plan and the probable arrive of the Apple iPhone onto their network.

Verizon saw quarterly profits fall from $1.18 billion in 2009 to $881 million this year, and revenues come in at $26.5 billion, just ahead of Wall Street estimates of $26.34 billion.

Verizon added nearly a million wireless customers during the third quarter, bringing its total to 93.2 million. The figure was enough to keep its subscriber base just ahead of competitor AT&T's, though it was less than half of the 2.6 million subscribers that AT&T added during its third quarter. The day before, AT&T announced that its subscriber base now totals 92.8 million subscribers and that revenues for its quarter were $31.6 billion.

Those elusive new customers may very well be waiting for Verizon to offer an Apple iPhone-as it is expected to in January-before signing up. While multiple analysts and anonymously quoted insiders have said this will be the case, Verizon has confirmed nothing, and during a call with media and analysts Oct. 22, executives offered no additional details. They did, however, say that their planned 4G network, which will rely on LTE technology, is coming together as planned and by the end of the year will cover 38 metropolitan areas and 60 commercial airports.

"I think we're very pleased with where we are in terms of the LTE deployment," Verizon CFO John Killian said during the call. "We mentioned [covering 110 million people] by the end of the year ... and all systems are go. The network will be in extremely good shape."

It has been suggested that Verizon will synchronize an iPhone announcement with its 4G launch. And likewise, that new tiered data pricing-which Killian confirmed Verizon will offer as a holiday promotion-will be put in place in time for the iPhone's arrival.

"We think there's a huge opportunity to continue to grow," he said. "We have a $20 billion annual wireless business. ... It's hard to describe that as 'early innings,' but we still believe it's the early innings of the data explosion."

While AT&T, which has struggled to meet the voracious data use of its iPhone base, learned its lesson and recently ended its unlimited data offer, Killian confirmed that Verizon will offer an unlimited data plan for $30, as well as a $15 plan for 150MB of data.

"We believe we have built over time ... a superior brand position that allows us to be unique in how we approach the marketplace from a data pricing [perspective] that's unique from what other companies do," he said, adding that he expects that customers new to smartphones will begin with the $15 plan but over time migrate to the $30 plan.

"We like the concept of tiered pricing," said Killian, "but we will continue to look at this. We will probably have some pricing changes when we roll out 4G and 4G pricing, so there will be more to come then."

Difference in 3G coverage areas has been a point of animosity between Verizon and AT&T (remember the Island of Misfit Toys ad?) and the plans of each carrier for 4G appear to set them up for future disputes. During the AT&T earnings call, CFO Rick Lindner explained that each carrier's 4G footprint will be limited.

"On our network, [customers are] going to have a great experience on LTE, but as they move off of that geography, they're going to have a very, very good experience on HSPA+," said Lindner, "versus other carriers, where you will see a significant decrease in speeds when you're out of their 4G footprint area."

In its earnings statement, however, Verizon announced that by 2012, its 4G LTE network is expected to cover "virtually all of the company's current nationwide 3G footprint." Regardless of whether Verizon gets an iPhone, it will begin selling the WiFi version of Apple's iPad beginning Oct. 28. And on Nov. 11 it will add Samsung's answer to the iPad, the Galaxy Tab, to its product lineup.