By Ryan Knutson
The wireless industry's price war is taking a bite out of
Verizon.
The nation's largest wireless carrier warned late Monday that
its profits are coming under pressure at the end of the year as it
rolls out discounts in an effort to win customers. The carrier also
said more of its customers were leaving for other carriers this
quarter than in the last quarter or last year amid heavy promotions
from rivals.
Verizon Communications Inc.'s shares fell more than 1% to $48.35
in after-hours trading.
The company has long been able to charge a premium for wireless
service, in large part thanks to its reputation for having a strong
network. The comments, however, show that discounts and other deals
from rivals T-Mobile US Inc., Sprint Corp. and AT&T Inc. are
taking a toll.
Last week, for example, Sprint said it would offer half-price
wireless service to customers switching from AT&T and Verizon.
AT&T lowered prices for many customers earlier this year and
more recently has offered extra helpings of data to encourage
subscribers to stick around or switch from other carriers.
Verizon said its promotions were bringing in plenty of new
customers, many of whom are choosing to buy their device without
subsidies and pay for it in installments rather than sign a
two-year contract. The percentage of subscribers taking that option
doubled from the previous quarter to 24%, the company said.
The company said the cost of those promotions would hurt its
wireless margins, overall margins and earnings per share. Verizon
plans to report fourth-quarter results Jan. 22.
The price war comes at an awkward time for Verizon and AT&T,
which are locked in a fierce government auction for airwaves that
has drawn bids worth $41.7 billion thus far and isn't yet over.
T-Mobile is also competing in the auction.
Write to Ryan Knutson at ryan.knutson@wsj.com
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