Verizon (NYSE:VZ) reluctantly launched its new unlimited plan in the middle of last quarter after experiencing a massive loss in phone subscribers. In its first-quarter earnings release, Verizon said it lost 398,000 subscribers before it launched unlimited. It ended the quarter with just 289,000 net subscriber losses.

Verizon appears to be carrying that momentum into the second quarter. At a MoffettNathanson conference earlier this month, T-Mobile (NASDAQ:TMUS) management told analysts the porting ratios between it and Verizon were worse compared with the second quarter last year. Meanwhile, its porting ratios with AT&T (NYSE:T) and Sprint (NYSE:S) have gone up, indicating that the new unlimited plan is really paying off.

Verizon's unlimited logo

Image source: Verizon

Improving on last year's benchmark

Verizon's phone net additions have been trending downward, but it could start to turn things around this quarter. Last year, the carrier added 86,000 postpaid phone subscribers in the second quarter, and it lost 0.96% of its total postpaid subscribers to competitors.

Verizon's churn rate -- the number of defectors -- will probably have the biggest impact. That's the effect that shows up in T-Mobile's porting ratios. During Verizon's first-quarter earnings call, CFO Matt Ellis said, "we saw an immediate improvement in the churn number" after the introduction of unlimited. With over 100 million postpaid subscribers, a single basis point of churn reduction equates to over 10,000 subscribers.

Verizon didn't give any hard details about churn reduction following the launch of unlimited, but it did say there was an increase in churn during the first half of the quarter before the introduction of unlimited. Nonetheless, postpaid phone churn remained below 0.9% for the eighth consecutive quarter. That means Verizon could report a significant improvement in churn during the second quarter.

The other factor to consider is gross additions. Ellis said there was an uptick in gross additions following the unlimited launch. But T-Mobile's comments that it's seeing improved porting ratios against AT&T and Sprint indicate that it might not be taking its fair share of subscribers from those competitors compared to T-Mobile.

Why is Verizon's unlimited plan working, but AT&T and Sprint's aren't?

It's worth noting that nobody had an unlimited plan at this time last year, except for AT&T, which offered it exclusively to DIRECTV and U-Verse subscribers. So, why is Verizon's unlimited plan keeping more subscribers at Verizon than its counterparts?

It's not due to the end of overages. Many Verizon customers did suffer overages. A Cowen survey from last year found 20% of subscribers paid an overage charge in 2015. But even more subscribers paid overages at AT&T. Verizon also took steps to reduce the pain of overages with Safety Mode last year.

More likely, it's due to the strengths of its brand and its network. Verizon has spent years establishing itself as the premium brand in wireless, and it's able to charge premium prices because of it. But its unlimited plan costs $10 more than T-Mobile's per month (plus taxes and fees, which T-Mobile includes in its pricing). That's not a huge price difference for most consumers.

More importantly, Verizon continues to maintain the best network in the industry. The consumer experience on Verizon is often better than competing carriers with better coverage and faster downloads. T-Mobile claims its network has reached parity with Verizon, but third-party measurement firms indicate otherwise.

Neither Sprint nor AT&T has the same pull with its brand, and their networks aren't up to par, either. T-Mobile can prey on those weaknesses as it continues to build its own brand and invest heavily in its network.

The impact on Verizon

While Verizon is able to keep more of its subscribers and possibly attract a few more gross additions than last year, many investors are worried about the impact the new unlimited plan will have on its average revenue per user. The earliest unlimited subscribers were customers optimizing their data plan, so that they can pay less per month.

As a result, Verizon saw pressure on its service revenue in the first quarter. "That pressure will continue in the second quarter," CEO Lowell McAdam said at a J.P. Morgan conference earlier this month. "But in the third and fourth quarter, it begins to mitigate and we start to see improvement in that pressure on revenue." That may be due to more gross additions coming to Verizon specifically for the unlimited plan, which has a higher average cost than most of its previous plans.

The unlimited plan seems to be benefiting Verizon's net addition numbers based on comments from the competition. The impact on its revenue, however, is still unclear, and investors should keep a close eye on it.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.