Verizon in Trouble

by Colin Berkshire

Verizon is being cannibalized by T-Mobile. A better word would be “gored”. They are losing hundreds of thousands of subscribers every quarter.

Let’s put this into perspective: A loss of a hundred thousand subscribers is a loss of revenue of more than $100 Million a year. Since there is no cost for adding a customer in the cell phone business, it means that each customer you lose will come 100% out of your profit margin. This means that this year Verizon will lose something like half a billion dollars of profit.

Verizon is being run by MBA-types, which is why they got into this mess and why it will be difficult to get out of it. A few years ago Verizon took on over $100 Billion in long term debt so that they could stupidly buy back their stock from Vodaphone. Then, they have sunk another $10 Billion into brilliant acquisitions including AOL and Yahoo.

So Verizon is in debt and is facing subscriber losses that will cost them billions.

What does an MBA do when this happens? Why, of course, they cut costs. Because everybody knows that when you are the premium, highest priced product in the market quality isn’t important. As a result, Verizon is worsening their network. Have you noticed REDUCED coverage in some areas? Slower speeds? Dead cell sites in the middle of the day. I have every reason to believe that Verizon no longer believes that they will win the battle with a superior network.

It is dangerous for a premium company to canabolize quality. They can end up in the worst of all worlds with alienated customers, declining revenues, and a tarnished reputation.

The subscriber losses at Verizon are staggering. The reduction in quality seems apparent to me. They have gone far afield from their core business with AOL and Yahoo.