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Verizon (VZ) to Gain From Customer-Friendly Prepaid Plans

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U.S. telecom behemoth, Verizon Communications Inc. (VZ - Free Report) , is reportedly launching customer-friendly prepaid family plans to attract more subscribers. We believe that such strategy to remain competitive and strengthen foothold in the wireless industry will benefit Verizon.

The U.S. wireless prepaid industry is getting more competitive with every passing day. The industry is also struggling with saturation issues. The gap between prepaid and postpaid average revenue per user has narrowed significantly, forcing telecom biggies to turn their attention to domestic prepaid mobile service business.

Currently, Verizon is a Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Verizon’s Latest Prepaid Offering

All prepaid lines include unlimited talk, text and data tiers along with 3GB, 7GB, 10GB and Unlimited data. Each data size is priced separately for the first line and then followed by discounted rate from second to fifth lines to help cut down on costs.

The 3GB Plan is available for $40 a month for the first line and $30 a month for the second-fifth line. The 7GB Plan for $50 a month for the first line and $35 a month for the second-fifth lines. The 10GB Plan is priced at $60 per month for the first line and $40 per month for the second-fifth line. Finally, the unlimited offering is priced at $80 per month for the first line and $60 per month for the second-fifth lines.

With Verizon’s new service, customers can choose a single specific plan for each member of the family, enabling them to customize individual monthly data plans.

Verizon had previously targeting prepaid customers. In April, Verizon introduced its unlimited prepaid plan with unlimited data, talk and text for $80 a month. Video streaming was limited up to 480p.

We believe such offerings should help Verizon strengthen prepaid customer base. We look forward to seeing? how the company performs in its upcoming third-quarter 2017 financial results.

Price Performance

Over the past three months, shares of Verizon have returned 14.7% compared with the industry’s increase of 7.6%.

 


 

Unlimited Prepaid Data Plan War

Stiff pricing competition in the industry is a genuine concern. Few months back, we witnessed four major wireless telecommunications companies, Verizon Communications, AT&T Inc (T - Free Report) , T-Mobile US Inc (TMUS - Free Report) and Sprint Corp (S - Free Report) , participating in the unlimited postpaid data plan war in order to strengthen foothold in the market. These wireless operators are now extending their unlimited data plan to the prepaid market as well.

T-Mobile US’ prepaid wireless service, MetroPCS Communications, Inc, has heated up the battlefield with its latest offering of unlimited LTE data, talk and text for $75 for two lines. In terms of the service differentiators, video streaming is supported in SD at 480p along with a $100 instant rebate on devices for new customers for each line.

That’s almost in line with Sprint’s Boost Mobile, which offers a prepaid unlimited plan for $50 per month for the initial line and $30 per month for each line after that, for an $80 per month deal for two lines. That offer, unlike MetroPCS, includes an international flair consisting of unlimited talk and texts to Mexico and 8GB of roaming data while south of the border. On the video front, Boost also touts “mobile-optimized streaming” in HD.

U.S. telecom behemoth AT&T’s Cricket prepaid wireless brand, offers a special two-line bundle of unlimited talk, text and data also for $80 per month, along with free phones (certain models) for new customers. It also allows calls and texts to Mexico and Canada, with no roaming charges.

United States Cellular Corp.’s (USM - Free Report) decision to increase the amount of data available in its existing prepaid plans have helped it gain 35,000 prepaid subscribers in the recently reported second-quarter 2017.

Bottom Line

Rapid technological invention and innovation have resulted in significant competition within the telecommunications industry. Product life-cycle and upgrade-cycle have declined drastically with several firms coming up with new versions of products and services within a short span of time. To combat competition, the players are thus increasingly looking at new avenues. Extending unlimited data plan to the prepaid market is one such avenue.

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