Bullet Point Analysis: Verizon Wireless' Share Everything Plan Minor Adjustment

WHAT IS IT?

Several tech news and blogger outlets have reported that Verizon Wireless will add a new 250 MB plan (at $20) level to its Share Everything plans as of January 21, 2014.

ANALYSIS

Big data users invariably dismiss this 250 MB level as miniscule, and it is. But there are two  areas why this makes sense. 

• First - Migrate the featurephone base to Smartphones and Share Everything Plans.  The Share Everything plan is now the only postpaid plan vehicle to migrate customers off legacy voice-centric plans (e.g., America's Choice - remember that?).  The new data-centric plan is also inexplicably linked to smartphone penetration.  Since 1Q2013, an Share Everything plan slide has been every quarterly earnings presentation deck.   

In 2Q 2013

 

In 3Q 2013

Verizon Wireless wants steeper curves on smartphone penetration and postpaid Share Everything account migration.  Here are the illustrative results since 3Q 2012. 

Since 4Q 2013 earnings is around the corner, it's likely to assume that smartphone penetration should cross 70% given the company's track record.  We can also safely assume that once Verizon Wireless nears the 100% Share Everything plan goal, there will be another more important growth slide to take its place. 

 

• Second - Provide a lower price point for featurephone users to convert to data. Previously, the lowest data price point was at $40 and provided 500 MB. Logically and in sales positioning, $20 and 250 MB is half.  While veteran smartphone users cringe at the low data level, Verizon Wireless is betting that once a non-data user starts to use data, they will get hooked and move up subsequent next tiers.  Increasing data usage is closely linked with helping increase Verizon Wireless' average revenue per account (ARPA) metric.

COMPETITIVE IMPACT?

Some may believe that this is Verizon Wireless' action against AT&T revamping its Mobile Share plans back in December 2013.  When laid out, we find that the new plan is in fact less competitive to AT&T. AT&T still has the advantage for Verizon Wireless switchers at the low data levels.    Given the above logic, the new $20/250 MB level will not get featurephone switchers. Those who are making the smartphone jump are likely to have explored T-Mobile or Sprint.

Still Verizon Wireless' opportunity may be in the existing range of data bucket choices with more price points and advantage in addressing the small business and high data use consumer accounts.   

Looking ahead, if history repeats itself, Verizon and AT&T users will start getting a handle of monthly data consumption and adjust accordingly. Once that happens, the number of data levels should shrink and (ideally for customers) price points will decrease.

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Substantive Switching Credit

I just caught this switching ad from Sprint. I found it through a Facebook ad.  The promise is to receive $400 credit for switching a family plan with 3-5 lines. It reprises a similar $400 effort reported in August 2012. While switching credits are nothing new, the $400 figure is notably high to entice. 

Sprint Switching Ad 

Sprint isn't the only carrier in the switching game for Q1 2013. US Cellular at the end of January launched a $300 switching promotion.   

What is the motivation?

• Postpaid Penetration - Carriers have long talked about the near saturation of the postpaid marketplace. In this world, organic growth has slowed and the only way to get net additions will be to steal it away from other carriers. 
• Quarterly (Q1) Performance - Both Sprint and US Cellular have been losing customers at a rapid rate.  Sprint's iDEN customer defections have been a thorn in its side for 3+ years.  US Cellular as a regional carrier has not been effectively competing against Tier 1 competitors despite upgrading to LTE and upgrading its device portfolio.
• Families are Low-churn & High ARPU-bearing - The promotion grabs 3-5 subscribers and the carrier locks them in for two years. The promotions specifically push customers into smartphones and data plans. Data is the monetary upsell and the sticky value-prop. 
• Promotion Credit Sunk Marketing Cost - In business, there needs to be promotion to draw interest to your product. Some companies have different tolerances for the cost to acquire a customer.  At the end of the day for Q1, Sprint and US Cellular need to beef up their gross adds.  

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