Verizon Sees End of Subsidies, Partners with Vodafone
Verizon Wireless sees the end of smartphone subsidies in the near future. Meanwhile, parent company Verizon Communications is looking to end its relationship with Vodafone.
Verizon Communications CFO Fran Shammo said this week during the Deutsche Bank 2013 Media, Internet & Telecom Conference that emerging platforms like BlackBerry 10, Firefox OS and Tizen will lead to more competition and lower smartphone prices. This in turn will reduce subsidy costs for carriers.
"I'm a believer that over the next two to three years subsidies will start to decrease just because of the ecosystems," he said. What's more, as Verizon migrates to Voice over LTE technology sometime between the end of 2013 and the start of 2014, smartphones will be offered without CDMA chipsets, thus reducing subsidy costs even more.
Shammo said that subsidy costs are a big part of Verizon's expenses, and that the model has "prevailed" in the U.S. market over the last 12 years. Margins are typically decreased when carriers sell a large amount of smartphones because of the higher subsidy costs they bring.
Over the weekend, news surfaced that rival carrier T-Mobile planned to move to a no-contract model on March 24 that will eliminate subsidies and early termination fees. The company will reportedly offer a monthly installment plan on smartphone purchases ranging between $25 and $30 USD. The new model is supposedly part of the "in your face" campaign CEO John Legere teased back in December, which is scheduled to launch after the MetroPCS merger in 2013.
Speaking of mergers, there's talk that Verizon Communications is looking to end its relationship with European partner Vodafone Group either by way of a buyout or a complete merger. Both parties were talking up a "full combination" as recently as December, but stumbled over disagreements on leadership and headquarters location.
Vodafone currently controls a 45-percent stake in Verizon Wireless that's reportedly worth $115 billion. Insiders claim that a complete buyout or a partial sale will likely be the outcome instead of a full merger, as New York-based Verizon is looking to take full control of its wireless carrier division by the end of 2013. So far no formal discussions of a merger are currently under way.
The venture between the two companies began when Verizon Communications was still named as Bell Atlantic Corp. during the Clinton administration. Both Bell Atlantic and Vodafone's U.S.-based branch agreed to merge their mobile units in September 1999, thus resulting in Verizon Wireless (and the debut of the "Verizon" name) which launched in the following year.
One recent merger scenario discussed between the two companies saw a new headquarters established in the U.K. led by Verizon CEO Lowell McAdam. Verizon shareholders would hold 55-percent to 60-percent of the merged company's equity, sources said. But that plan died because of Verizon's resistance in migrating to Europe, and Vodafone CEO Vittorio Colao's reluctance to step aside.
If carriers still want to lock you up for two years, they should discount their service for that term, that way there is at least a monetary reason to enter into a contract.
Just like they still claim 'the majority' of their customers save money on their family share plans. I am surprised they didn't deceptively call them 'Share and Save Plans'.
The reason they haven't done this already is that their network won't be 100% LTE capable until early 2014 more than likely. As much as I dislike Verizon's prices, they've been very aggressive about rolling out LTE. I'm very much enjoying their LTE service at my house and around town, it has been very reliable and consistent.
Down the road they could even reclaim some bandwidth by shutting CDMA off entirely, but this won't happen until even further down the road as it would render older phones useless and they'd have to hand out an awful lot of new phones. So they're going to wait on that until most of their customers have upgraded by choice or by necessity (damaged/inoperative phone).
I have a suspicion that the monthly bill won't get lowered at all. The subsidies will simply disappear and Verizon will pocket the rest. Then we'll be paying ~$600 for a smartphone (upfront or by some monthly installment) and the same $40 per month for service. Verizon sure has creative ways to increase the price.
"Verizon partners with Vodafone. Verizon Communications is looking to end its relationship with Vodafone."
*Shakes head*
The same is true for them dreaming of the day they can go all LTE. No 3g network to operate has the dual effect of saving them money (a good thing), and screwing all of the other carriers that aren't pure LTE. No 3g network, no 3g roaming agreements. Forces others to spend money. Eliminates competition - or has the potential to.
VZ's not doing this to save you a penny. I'd be the same thing if they shut down 3g. It would save them money by not running parallel networks, and stick it to the other carriers because no operational 3g network means no 3g roaming agreements.
I checked out Sprint....the service sucked and the prices sucked more. To get a similar plan from Verizon, using similar phones....would have cost me $150/month for 2 phones. Checked out nTelos (who claims to have the lowest price of all contract carriers). A similar plan from them would have cost me almost $180. Checked out T-Mobile....their coverage sucks and always has. Same story with them....higher prices for similar service....
People can whine and complain about prices all they want....but all that matters is they pay for the service. As long as people are willing to pay the prices....there's no reason for the carriers to reduce their prices.
With prepaid stuff you can pay about half that for similar stuff. I assume 2 phones? With Straighttalk (who uses verizon's network as well as ATT and Tmobile) you can pay $45 a month for "unlimited" everything per line. You are getting a better deal, but you aren't saving money and you aren't getting the best deal.