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Verizon revisits compensation models within its consumer group

Last Friday, Verizon announced a number of executive changes among its top ranks, including the news that its CFO Matt Ellis would leave the company in May. But that didn’t stop Ellis from speaking at Morgan Stanley’s Technology, Media and Telecom Conference today, where he was asked about the Verizon Consumer Group.

The consumer business has struggled for a couple of years with losing subscribers. As part of the executive shuffle announced last week, the company named Sowmyanarayan Sampath as the new CEO of Verizon Consumer Group. Sampath is moving over from his position as head of Verizon’s Business Group, which has been successful of late.

In today’s Morgan Stanley call, Ellis was asked what Sampath will focus on first as head of the consumer group.

He said, “It’s around being focused on a few key things rather than trying to do too many things; and focus on execution.”

He said perhaps the consumer group had gotten distracted in the past couple of years trying to do too many things at once. “I think you’ll see Sampath getting very much back to the basics of what made Verizon Wireless the biggest and best performing carrier in the U.S.”

Ellis said the consumer group will re-examine its business “at a more regional level” in terms of its marketing and promotion decisions.

He also emphasized that Verizon will revert to some of its previous compensation models “that have been more effective in the past.” But he didn’t specify if these compensation models were at the retail-store level or higher up. He said the compensation models “are going back into place as we speak.”

Wave7 Research has noted that the phone numbers of Verizon’s retail stores are currently all being funneled to a single 1-800 number, and it’s very difficult to even call a local Verizon store.

“So, as you bring all those things together and focus on the detail of running the business on a day-to-day basis where at times maybe we weren’t as focused on that in the past two to three years, I think those will be the biggest changes you’ll see,” said Ellis. “And I would expect over the course of the year we’ll get momentum behind that that will start to show up in the results.”

Ellis also mentioned Verizon's Welcome Unlimited plan, which it introduced in the second half of 2022.

Ellis said it gave the company the opportunity to advertise at a lower price point and drive foot traffic into the stores. And then store teams have the opportunity to potentially up-sell customers. “That will continue to be a focus,” he said.

TracFone and MVNOs

Verizon bought the prepaid wireless service TracFone in November 2021. Asked how it was doing, Ellis noted that Verizon didn’t historically own many prepaid customers. (It has about 4 million Verizon Prepaid customers). “We’ve relied on wholesale relationships, with TracFone being the largest one,” said Ellis. “So owning those customers and as those customers are ready to move from prepaid to postpaid, we can keep them within the family. It’s an opportunity that we didn’t have in the past that we have now.”

But he said the integration of TracFone has been a little more work than Verizon initially anticipated. “As the year goes on you’ll see better performance in the second half of the year than the first half of the year in the value segment.”

Ellis was asked a question that he said he gets asked a lot, relating to the frenemy relationships that Verizon has with the cable operators. On the one hand, Verizon leases its network to Comcast, Charter and Cox so that these cable companies can provide mobile virtual network operator (MVNO) services. But on the other hand, these MVNO offerings compete directly with Verizon’s own mobile services.

Of the cable companies' mobile offerings, Ellis said, “We know that customers don’t particularly like these deals where there’s an initial headline price and after 12 or 24 months you move back to rack rates. I would imagine when customers hit that mark when they go from promo rate to rack rate, there’s friction.”

In regard to the tension between having the cable companies as wholesale customers, but also competing against them in the wireless space, Ellis said, “The postpaid revenue we have directly with a customer is going to be higher than what we receive for a customer they [the cable cos] have.” But he noted there are a lot of costs that the MVNOs incur for their customers such as promotions, billing and collection and customer care. “We certainly would love to have all our customers to be postpaid customers, but if people want to offer a wholesale service, we’re more than happy to do it on our network and increase the monetization on the investment we’ve made in the network.”

He said if the cable companies want a wholesale wireless network “I’d rather it be on our network than somebody else’s.”

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