Verizon is hurting. Yes, it still has the leading subscriber share among U.S. operators, has the highest ARPU and is still regarded as the premium brand. But the company has been losing share. Its product line and marketing message are muddled. Consensus on the Street is not positive. And Verizon’s competitors are on their game: T-Mobile is continuing to do what it has done successfully for the past several years; AT&T is more focused after its time in the Warner wilderness; and cable is now a factor, rather than merely nibbling away at the margins.
Proof of this state of affairs at Verizon was the firing this week of Manon Brouillette, head of the company’s consumer business, after less than a year on the job.
So, what should Verizon do? Here are my five pieces of advice for Verizon to right the ship in 2023.
1. Do something unique with consumer 5G
Verizon is ending 2022 with its Ultra Wideband covering 175 million customers. This is ahead of schedule, and a major accomplishment. Verizon’s mid-band 5G coverage is now competitive with T-Mobile’s Ultra Capacity 5G. AT&T lags by 6-12 months and does not have as strong a spectrum position overall.
Verizon should focus less on gimmicky streaming TV and music giveaways, which dilute profits and do little to enhance its brand. Instead, it should use its size, relationships and market muscle to develop some unique apps or partnerships that show the strength of its 5G network. For example, Verizon could partner with Microsoft’s gaming unit or another leading gaming brand to offer some unique content to their subscribers. Or, choose another entertainment category. The objective here is to demonstrate the strength of its network, create more reasons for subscribers to stay and upgrade, and build more relationships with the sorts of leading companies that could create some meaningful differentiation in consumer 5G.
2. Double down on the enterprise.
The enterprise has been a bright spot for Verizon over the past couple of years. The MEC relationship with Amazon is starting to pay off. Verizon is getting its share of the just-now-starting-to-grow private network market. This is a time to double down. AT&T’s enterprise business has regained some momentum now that it is more focused and is investing in the space. T-Mobile is making a major push. I spent a couple of days with the T-Mobile enterprise team at an analyst event in October and came away impressed.
Verizon needs to make sure that it over-indexes its competitors in the enterprise market. This is where the bulk of the incremental 5G revenue opportunities will come from over the next few years. Verizon should pick a few lanes and go hard after them. It has a good opportunity to gain share in the government sector. Its mmWave assets present good opportunities in the manufacturing and the industrial segments. It should develop a handful of marquee SI/VAR relationships to pursue the “carpeted” office environment.
3. Do something with TracFone.
The deal closed a year ago. And so far, Verizon has done bupkis with this asset of 23+ million customers. I suspect this is one of the reasons for Brouillette’s departure. Angie Klein will be the head of the new Verizon Value group (as of January 1, 2023), which will comprise TracFone, Verizon Prepaid and Visible. The first step is streamlining and stabilizing. There have been all sorts of mixed signals about what is going to happen to several of the TracFone brands. Consumers are confused, and the dealer infrastructure is a mess. Verizon doesn’t need 10+ different prepaid brands. It needs 4-5, with clearly defined segments and a viable value proposition for each. And it needs a reinvigorated marketing campaign.
Verizon needs to do this fast, or it stands to lose some important retail distribution relationships. There’s also a huge amount of back office work to do at TracFone to bring its billing systems into the 21st century and integrate it with Verizon’s systems. This is a huge task – and I suspect one of the reasons there’s been some delay in developing anything particularly new or innovative with this asset.
4. Realize the FWA opportunity is finite.
FWA has been a bright spot for Verizon. The company has made good progress on the product side (such as a good self-install capability), and is able to really hit the accelerator now that C-Band coverage is wider. They reported 1 million FWA subscribers as of Q3. At the same time, while FWA is a nice proving ground for 5G and is really the only successful 5G use case so far, I believe the opportunity is finite. T-Mobile and Verizon are leveraging their relatively empty new mid-band networks. There are only so many customers that can be supported with an average broadband consumption of 500 GB/month.
Verizon seems to acknowledge this, indicating its ‘target’ is 5-6 million FWA customers by 2025. Even if it achieves that goal, it would represent only about 2% of projected 2025 revenues.
5. Develop an effective consumer marketing campaign.
Verizon’s latest consumer marketing strategy is off, in my view. It’s sort of this triumvirate of expensive ads featuring Hollywood stars, a generic tagline of “The Network America Relies On,” and shill for the bevvy of Apple products it’s giving away. Verizon needs to recapture its marketing mojo. It can no longer rely on a network-centric marketing message. Verizon needs a campaign that matches a brand statement with the actual benefits that customers receive, such as T-Mobile continues to do with “Uncarrier” and AT&T’s recent, quite successful “Simple” campaign. As the premium-priced provider that no longer offers a clearly identifiable premium experience, Verizon is in a tough spot. But with 5G UWB now available to the majority of the U.S. population, and the Verizon Value Group launching, 2023 will be a critical year for some brand reinvigoration.
Finally, there’s the M&A question. The various 2010s media misadventures of both Verizon and AT&T have made them understandably skittish about major M&A. But there’s some major disruption starting to roil the tech and media/streaming space. Valuations have come back down to earth. This could present some interesting buying opportunities. It’s worth considering, for example, whether there’s an acquisition that would position Verizon to gain an outsized share of the enterprise 5G market.
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