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Verizon CFO advises against abandoning smartphone subsidies
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MacNN Staff
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Mar 11, 2014, 07:38 AM
Offering customers smartphone subsidies should not be abandoned by carriers, the Chief Financial Officer of Verizon has advised, with other aggressive promotional strategies apparently being viewed in a similar way. Speaking at a Deutsche Bank technology conference, Fran Shammo suggests carriers should not keep attempting to undercut their opponents in an effort to gain more subscribers, claiming "We're not going to buy customers. You have to earn customers."

Shammo advised the wireless industry still has "a lot of room to grow," reports Recode, when discussing recent price plan changes by all major carriers that offered more data to customers at a lower cost. The industry did similar moves in the past, offering more allocations of voice call minutes, but Shammo claims the revenues of the companies involved continued to rise anyway, and doubts the current changes will damage Verizon in the long term.

Verizon Chief Financial Officer Fran Shammo
Verizon Chief Financial Officer Fran Shammo

Trade-ins and installment plans for smartphones, such as T-Mobile's Jump plan, are also not a focus of the carrier, according to Shammo. "There is a lot of risk with the installment sale. We're going to take a very conservative approach here," said the CFO, indicating a continued reliance on the existing smartphone subsidy system. While Verizon offers its own similar program, Verizon Edge, Shammo advises that it is offered to those with high credit scores to minimize risk.

Shammo also pointed towards issues with offering customers more services, in an attempt to attract them to the carrier's LTE network. While Verizon will expand on its use of available spectrum, as well as routing calls over LTE, services such as streaming live TV or on-demand video may have issues earning enough to pay the content providers. Indicating a need for new business models in the field, Shammo advises "the ecosystem will have to develop here." When discussing peering agreements with content providers, such as Netflix, Shammo revealed a confidence that a deal could be reached, claiming "We're very comfortable with where we are."
( Last edited by NewsPoster; Mar 11, 2014 at 09:51 AM. )
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Mar 11, 2014, 11:18 AM
The subsidized 2 year contract is a real money maker for carriers, they get lock in by the customer, put in all sorts of cost obstacles to fight switching (note has little to nothing to do with their costs) e.g,, unlocking phones. This is a great racket for them, look at their profitability and earning even with their "investment argument. The main reason for the noise about subsidized is entirely driven by iPhone success to be:
1. Independent of carriers, 2. Higher cost to carriers not consumers, 3. Strong customer value connection vs carriers xx&$ relationship, and their failure to really succeed in getting leverage over Apple through promotion of Android and SAMSUNG.

All comparisons in cost, service, speed, etc., of non-US carriers around the world especially Europe and Asia, show them to be over charging and under delivering.
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Mar 12, 2014, 06:46 AM
If Verizon Management wants it, I am not sure it is good for consumers. While not as anti-customer as AT&T, they aren't far behind.
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