Home - , , , - CFO Admits Verizon Doesn't Care About Prepaid, Calls TracFone Verizon's Prepaid Product

CFO Admits Verizon Doesn't Care About Prepaid, Calls TracFone Verizon's Prepaid Product

Speaking with investors yesterday, Verizon EVP and CFO Fran Shammo (image) said what many in the prepaid industry long suspected; Verizon has no interest in gaining or keeping prepaid customers. In response to a question about Verizon's continuing prepaid subscriber losses (Verizon has lost prepaid customers in each of the last five quarters) and how the company plans to counter recent prepaid gains by AT&T's Cricket and T-Mobile's MetroPCS, Shanno said;

"Our retail prepaid is above market. We're really not competitive in that environment for a whole host of reasons and it's because we have to make sure that we don't migrate our high-quality postpaid base over to a prepaid product.

If you look at the competitive nature, they are doing it with sub brands. They are not really doing it with their brands. And quite honestly, we use the Tracfone brand as our prepaid product.

Tracfone has been extremely successful for us. It's not something that we disclose any more on reseller, but it continues to increase on the high-quality base of Tracfone, so that's really where we use and go after the prepaid market. More to come on this during the year, but currently that's how we
operate under the prepaid model"

In other words, Verizon is more worried about losing some of its "high quality" (translation: high paying) postpaid customers to cheaper prepaid than it is with losing overall market share. Reading between the lines Shammo seems to be saying that while prepaid is a better value for consumers, Verizon doesn't want to make that fact too obvious to its postpaid customers.

As for TracFone being Verizon's "prepaid product" and TracFone being "high quality", I don't know if Shammo is being serious or making a dry joke. As he points out, AT&T and T-Mobile are fighting for prepaid customers with their sub-brands Cricket and MetroPCS. So why isn't Verizon doing the same? TracFone is taking a cut of prepaid revenue that Verizon could keep to itself if it had a prepaid sub-brand on its own. Shammo does leave the door open to Verizon soon taking a different approach to prepaid, saying "More to come on this during the year, but currently that's how we operate under the prepaid model." I wonder if that means Verizon will launch a value priced prepaid sub-brand this year?

In most of the world, the majority of mobile users are on prepaid and the US market continues to move in that direction. For a long time Verizon has been able to command a premium price based on the breath and reliability of its network. But that era seems to be ending. T-Mobile's network is as good as Verizon's in urban areas and AT&T's network has caught up with Verizon's in both urban and rural markets. With its network advantage gone, how long can Verizon hold on as a premium priced provider that dismisses the prepaid side of the business?

Source: Verizon Investors Conference Call (PDF Transcript) via FierceWireless

40 comments:

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  1. simply don't use Verizon.

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    1. I would if it cost less. It's hugely better than T-Mobile and Sprint, and just a little better than AT&T.

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    2. Verizon is nearly as bad as Sprint in my metro area - lots of garbled voice. T-Mobile is best, with AT&T second. I know - I've tried them all.

      In other words, the "best" carrier varies by geographic area.

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  2. Verizon seems to have a very adversarial relationship with their MVNO's. They obviously don't try to push their own Verizon Prepaid brand. They don't even give it a real name. Just Verizon Prepaid... Really? They limit download on 4G to 5 MPBS. Pretty lame speed. They do have the biggest network but I think AT&T is pretty close. Cricket Wireless looks VERY competitive to any Verizon MVNO.

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    1. You missed the entire point.

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    2. "...They don't even give it a real name.Just Verizon Prepaid..."

      That kind of honesty is refreshing, actually. More of a real name than most of the others.

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    3. That's not true. Verizon Prepaid speed is not capped like Tracfone. I rather use Verizon Prepaid than deal with any of the Tracfone brands. But I'm not chasing cheap data, I can thether or stream and not have to worry about crazy T.O.S. rules like on Tracfone. But like I said, I'm not chasing cheap data. 2GB a month works for me.

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    4. It is true that Verizon Prepaid is not speed capped. Sorry, I was only thinking of the MVNO's beyond Verizon's own. Zach, The point is that Verizon is trying to "hobble" their own MVNO's so they don't get too popular. They want Verizon to remain a very costly premium brand. I think that time may be passing if not already gone. I use Selectel and very much like the extensive network but I think Verizon is holding the Verizon MVNO's back. When the CEO says they think Tracfone is a high quality replacement you know the are aiming VERY low!

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  3. It seems Verizon doesn't want the prepaid side of wireless service simply because it will cut into their high-profit margin postpaid service. Problem for Verizon is that carriers such as At&t, T-Mobile and to a lesser extent Sprint, have found that prepaid service can be a 'gateway' for new customers that normally wouldn't look at their pospaid service. Furthermore, some of those customers will then migrate to postpaid or even buy related services. A perfect example is how At&t as adding subscribers both to it wireless service and Direct TV subdivision. In the end, by neglecting prepaid, Verizon many simply shrink it subscribers until profitably is impacted.

    Also, using Tracphone as their preferred prepaid provider really shows how much disdain Verizon has for prepaid customers. I don't understand how Verizon's leadership could be so arrogant. After all, Tracphone's poor service could be driving customers straight into Verizon's big competitors like At&t. Customers who may never look back at Verizon ever again.

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    1. GEE- I didn't know that TracFone is so terrible. I'm glad you told me. I've been a TracFone user for over 10 years and am enjoying using 2 LG G3's at a total cost of $6.50 each per month for all the talk and data I need. TracFone even allows my minutes and data to rollover and doesn't steel them like most carriers. I even rather enjoy the occasion to call TracFone. English is not usually the preferred language of the technician and it's fun to learn how to get something solved with 2 people struggling to understand each other. I don't live with a cell phone in my hand. I still use a cell phone as another necessary pain. I don't take a cell phone into a restaurant or a home when I visit someone. Maybe I'm doing something wrong and should reconsider joining the fools who make a cell phone the most important event of their daily lives and pay $60 a month to one of the major carriers. Thank you TracFone for giving me the opportunity to be able to bring my own phone to your service and get all the benefits some of these nerds pay outrageously for.

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    2. Haha - reminds me of the "We are Settlers" commercial.

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    3. Now more than ever they need high-profit margin postpaid service to pay the union salaries. It's basic math.

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    4. Cool, you're in the minority. Move along...

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  4. I travel a lot. Verizon still dominates rural coverage. I have looked at ATT coverage maps and tried ATT. On paper ATT looks great but in reality no one touches Verizon for rural coverage.
    Verizon is giving up a large and growing market by neglecting prepaid. Verizon shareholders need to demand new leadership. These are the same bozos who over paid $40 billion for half of Verizon Wireless.

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    1. Or at&t who paid that to t-mobile for..... Nothing!!!

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  5. Verizon's arrogance knows no limits. I drive a truck for a living and MetroPCS does everything I need and more.

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  6. Too much hubris. Prepaid is really trending right now, especially with the millennials they seem to value so much. Tracfone themselves lost nearly 350K customers in 2015 and they operate on 3 national carriers and multiple obscure brands. AT&T seems to be doing a better job shielding those "high value" customers with bundles and unlimited data. I've used Verizon and I don't get the coverage argument, there have been many (urban) places I've visited that T-Mobile had coverage and they didn't. Why would anyone pay more just for the possibility of having coverage on some rural farm or shanty town. I'd rather have no service in a few spots (use WiFi) and pocket the big savings. Why blow your monthly expenses on a pittance of wireless service? Do you really need Spotify or YouTube everywhere?

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    1. Because a lot of people are farmers working on farms and in shanty farm houses or possible truckers who truck to small towns or any number of reasons! As far as I'm concerned there's no excuse for a telecom business not to have 100% coverage in an area they claim to cover with their service. That's a big problem to me. But Verizon and every other telecom would be nothing without roaming agreements with small/er and/or local cellular companies. This is where T-Mobile has or at least had it when AT&T was basically gouging. The whole industry is utterly ridiculous and outrageous in its greed, avarice and selfishness. I cannot wait till Google, Apple and/or whatever other content providers take it over completely and get rid of this horrible atmosphere. Sure they may not be much better but at least they can make it feel or seem like it is with their slick advertising and smooth talking.

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    2. I believe that many of the "high quality" postpaid customers are not ignorant, but are on grandfathered unlimited data plans. Since Verizon increased the price of these plans, some of these "little birdies" are flying away. Now, they might be reevaluating just how "high quality" these customers actually are.

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    3. "Why would anyone pay more just for the possibility of having coverage on some rural farm or shanty town."

      Verizon covers most states very well. T-Mobile covers only a few states very well, even in the Eastern states. The "shanty town" or "Montana" arguments hold no water.

      "No service in a few spots" is the norm for Verizon. "No service in many spots, more than half of the places" is the norm for T-Mobile.

      "Why blow your monthly expenses on a pittance of wireless service? Do you really need Spotify or YouTube everywhere?"

      Because if you need to check your email or something anywhere, it's cool to be able to do it just about anywhere on a real national network like Verizon or AT&T instead of planning a half day trip to some place that actually has T-Mobile.

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  7. Sounds like Verizon may revamp their wholesale rates to spawn more MVNOs. Perhaps they're planning Go90 Wireless to target "millennials".

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  8. I agree with Dennis. However, it depends on your rural area. In my area, ATT has the best coverage of any carrier. Verizon finally added antennae 2 years ago, so I finally have usable coverage on Verizon. Comparing both phones side by side, they are very close, it's a toss up which is better.

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  9. Q: "...how long can Verizon hold on as a premium priced provider that dismisses the prepaid side of the business?"

    A: For as long as they can keep their "high quality postpaid base" in the dark. Verizon thrives on its customers' ignorance.

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    1. Totally agree.

      Unless you read online/follow other sources of information about wireless coverage, you'd never know you have options for service based with Verizon. People can try PagePlus or Selectel, but most folks don't even know those exist. Tracfone still has a "drug dealer/low-income" stigma that prevents many hoity-toity postpaid customers from migrating over - despite the fact that the service might be perfectly adequate for their needs. I actually use the Tracfone BYOP GSM service - and have cut my already low bill (don't use much service - mostly texts) to around $200 a year. If more people were aware of Trafone BYOP CDMA, they, too, might realize just they're overpaying for service each month.

      No wonder Verizon stays mum.

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    2. hi Stephanie:

      " People can try PagePlus or Selectel, but most folks don't even know those exist."

      I think that is true. I would have never heard of either if not for this web page.

      2) Tracfone still has a "drug dealer/low-income" stigma that prevents many hoity-toity postpaid customers from migrating over

      I really wonder about that. Does this so called "stigma" really affect buying decisions? If it does, tell me how it matters? Can you look on any crowded street, seeing people using their phones, and tell which of them are using Tracfone???

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  10. Tracphone?? Haha

    Talk about starting at the bottom, can only go up from the absolute worst.

    For non-smart phones VZW pre-paid eliminated their $1+(.10/min.) & $2 (unlimited)/day and .25/min. plans a while back. Pretty obvious they didn't want the occasional Grandma user even at those high, non competitive rates.

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    1. Love the fact that Tracfone has smartphone plans now as low as $6 (3 phone plan $10, $6, $6) month. I need a phone, I want a smartphone, I need great coverage but I also want to pay just $6/mo ($7.33 ave). I use the phone little for voice, data and sms (google voice on wifi) so $6/mo for even high cost (per call, per sms, per mb) rollover units works for us.

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    2. Enough Tracfone bashing! The BYOP program has brought in a lot of new people both CDMA and GSM. High end phones too. Very versatile service if you know the system. 13 year user and not moving anywhere.

      Issues like lack of roaming, throttled LTE, and phone restrictions are from Verizon policy and not the MVNO's. Only one that can roam is Selectel because they run on Verizon postpaid.

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    3. "Tracphone?? Haha

      Talk about starting at the bottom, can only go up from the absolute worst."

      I'd still use Tracfone over anything T-Mobile based, because the T-Mobile network is so much smaller and rather threadbare. So there's worse than your bottom. Sprint is below too.

      Tracfone means data in most places. T-Mobile and Sprint mean occasional data, with area of no coverage being quite common.

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    4. tlippyApril 24, 2016 at 8:38 AM

      GEE- I didn't know that TracFone is so terrible. I'm glad you told me. I've been a TracFone user for over 10 years and am enjoying using 2 LG G3's at a total cost of $6.50 each per month for all the talk and data I need. TracFone even allows my minutes and data to rollover and doesn't steel them like most carriers. I even rather enjoy the occasion to call TracFone. English is not usually the preferred language of the technician and it's fun to learn how to get something solved with 2 people struggling to understand each other. I don't live with a cell phone in my hand. I still use a cell phone as another necessary pain. I don't take a cell phone into a restaurant or a home when I visit someone. Maybe I'm doing something wrong and should reconsider joining the fools who make a cell phone the most important event of their daily lives and pay $60 a month to one of the major carriers. Thank you TracFone for giving me the opportunity to be able to bring my own phone to your service and get all the benefits some of these nerds pay outrageously for.

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  11. Has been my experience as well. Verizon coverage is the bestbut I will put up ATT coverage due to the significant difference in price.

    "AnonymousApril 22, 2016 at 9:48 PM

    I travel a lot. Verizon still dominates rural coverage. I have looked at ATT coverage maps and tried ATT. On paper ATT looks great but in reality no one touches Verizon for rural coverage..."

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  12. Verizon got it's (good) reputation when they were a mostly CDMA network I could make and receive calls in the bowels of building also rural coverage was better than GSM carriers. The problem and reality is they are joining everyone else with LTE & GSM fazing out their CDMA network and using it for their prepaid network which limits prepaid customers in ways like wifi calling which isn't available for prepaid customers.. After about 3yrs I went back to T-Mobile getting more for less money per month.

    Maybe I'll go back to VZ if they get better.. That's the beauty of being a prepaid consumer!

    S

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    1. You're totally confused, along with the guy below. CDMA and GSM are 2G technologies. WCDMA/HSPA was GSM's 3G upgrade path, while CDMA went EV-DO.

      LTE is the technology that finally unified both paths, but is not a spread-spectrum technology like CDMA despite being mostly developed by Qualcomm, who also developed CDMA. *BUT*, just to do confuse you and most other people, there are *TWO* forms of LTE (both are 4G), Frequency Division [duplex] (FD[D])-LTE used by most carriers around the world like GSM is, and Time-Division [Duplex] (TD[D])-LTE, developed by the Chinese to get around FD-LTE patents in the West and used by Sprint (especially on their Spark network) and some other carriers. FDD uses 2 channels like most cellular networks while TDD uses just one like Motorola's Canopy and IEEE's WiMAX so is more spectrum efficient, likely much cheaper (no duplexers, but likely still combiners), but likely HSPA-like latency (ping)--I don't have Sprint, though, so I haven't tested this.

      Cellular techs have NOTHING to do with being prepaid or not, or with wifi-calling. **NOTHING** They are totally different things, using different bands and even different physical radios in your phone!

      Finally, 5G has as much to do with GSM as LTE does. In fact, it could end up being a valid argument that 5G has as much to do with LTE as GSM does, but I don't know that yet (and I'm not sure if anyone else does yet, either).

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  13. The world's trend is GSM and only few countries using CDMA. It will be change a lot after launching 5G.

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  14. Verizon provides both GSM and CDMA, with the former being the path of the future.

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    1. Not really. Verizion uses the CDMA and LTE technologies. LTE has also been adopted by most GSM operators and is the path of the future, at least for now. But LTE is not part of the GSM standard.

      Verizon may run GSM on a few towers for the benefit of roamers but it doesn't sell GSM service directly to consumers.

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  15. I run an Internet Radio Station and Mobile Data and calling is utmost importance. Right now due to finances (long story) I am right now stuck with sprint but that will be a short lived issue. I had AT&T before the kids ruined my credit with them and I can say they are the BEST WAY TO GO!! The coverage is as good as Verizon and their choice of phones is very good. I can also tell you that Verizon's voice quality is going own in rural areas like Deltaville, VA. Sprint is really bad however. Too many dead areas and it really messes up my ability to monitor the station when I travel to Gloucester, VA. I'd love to have AT&T again they really are great and works very well for a Internet Radio operator like myself. You can tether as well so I can quickly log into my remote DJ server and take care of business if I have to with a laptop. Yes for a Internet Radio operator you really should think about AT&T because they will serve you better.

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  16. Looks like verizon needs a new CFO and possibly CEO, i mean with mindsets like these, they are losing more revenue that could be theirs if they would only do a little more in prepaid

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  17. They can probably save a lot of money by shutting down 2G early.

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