Verizon's Shammo Expects Tiered Data Pricing to Deliver Future ARPU Gains
Verizon (NYS: VZ) Wireless expects to gain benefits to its average revenue per user from the company's tiered smartphone data pricing in the years ahead as average mobile data usage increases, a top executive said.
Speaking at the Oppenheimer Technology & Communications Conference, Verizon Communications CFO Fran Shammo said that as more customers use LTE devices and as video and other multimedia content traffic increases, more customers will move to its higher priced $50 and $80 data usage tiers. "Usage is on an escalating scale," he said. "The tiered pricing will become more important as times goes on than it is today." However, he did not give a timeframe for when he expects that kind of transition to take place.
Shammo touched on a wide range of topics in his appearance, including AT&T's (NYS: T) proposed $39 billion acquisition of T-Mobile USA, the state of competition in the industry and Verizon's prepaid business.
The Verizon executive said that the company is not in favor of or opposed to the AT&T's proposed purchase of T-Mobile. "We believe the industry does need some consolidation, but it has to be consolidation under the right terms," he said. "If it goes through, we need to make sure it goes through without regulation."
Interestingly, Shammo said smaller players, including Sprint Nextel (NYS: S) , MetroPCS (NAS: PCS) and Leap Wireless (NAS: LEAP) need to become stronger and gain more scale. However, he said in terms of consolidation at the lower end of the market, he would like to see the companies come up with solutions on their own rather than having Verizon try to acquire a smaller carrier.
Shammo also touched on Verizon's "Unleashed" prepaid offering, which offers prepaid unlimited wireless calling, texting and data for $50 per month. Verizon has been testing the prepaid plan since the spring in select markets in California and Florida. He said Verizon might expand the offering to other markets, but did not provide details. "The crown jewel for us is the postpaid base," he said. "We have to make sure what we do doesn't cannibalize the postpaid base."
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