The second quarter was Verizon's (NYSE:VZ) first full quarter following the release of its unlimited plan. Prior to offering unlimited data, Verizon was bleeding subscribers to T-Mobile (NASDAQ:TMUS) and other competing wireless carriers. And while it might still be bleeding subscribers, the unlimited plan is certainly helping stem the losses.

But a recent survey from Cowen and Company, found Verizon is the largest donor of subscribers to other carriers. Cowen determined Verizon's late entry to unlimited plans cost it a lot of subscribers.

But one number from T-Mobile's earnings report indicates Verizon is starting to turn things around.

Verizon unlimited logo

Image source: Verizon

A close look at porting ratios

T-Mobile reports its porting ratios with the other major carriers just about every quarter. The porting ratio is a good indicator of how many customers switch from one carrier to T-Mobile. A number over one indicates T-Mobile is winning more customers than its losing from that carrier. T-Mobile has reported porting ratios above 1 with every major wireless competitor for three years straight.

But last quarter, T-Mobile's porting ratio with Verizon fell to 1.2. That's the lowest level it's seen in years. Even when Verizon was incentivizing subscribers to port their number, it didn't see a porting ratio so low with T-Mobile.

Here's how it compares to AT&T (NYSE:T) and Sprint (NYSE:S) as well as prior periods.


Q2 2017

Q1 2017

Q2 2016













Data source: T-Mobile quarterly earnings calls

As you can see, all three carriers made improvements against T-Mobile compared to the first quarter, but compared to the same period a year ago, Verizon was the only carrier that saw improved results. That's despite Sprint's efforts to attract subscribers with free service for a year and AT&T's unlimited bundles including discounts for its TV services and HBO.

T-Mobile's results as an indicator of the recent past

It's important to note that T-Mobile is just one of Verizon's big competitors. To wit, the trend in porting ratios is only an indicator of improving results at Verizon versus all of its competitors. But considering T-Mobile is the only carrier exhibiting significant postpaid subscriber growth, it's a pretty good indicator. Things are looking better for Verizon.

Cowen and Company's survey shows a long-term view of the past. Verizon has donated more customers to other carriers over the last two years. That said, Verizon has more retail customers to donate than any other carrier, so it would only make sense that it loses the most customers. Additionally, Cowen's report doesn't look at trend lines. It's important to remember to invest based on expectations for the future, not what's happened in the past.

Comments from T-Mobile's management indicate Verizon is doing a better job of holding onto its subscribers than it has in the past.

But that subscriber retention comes at a cost

There are a couple of factors that show up in the cost of Verizon's new unlimited plan. While it's helped the company retain subscribers, its average revenue per user is declining. That's because the first customers to switch to unlimited are those that can save money since they're regularly hit with overage charges from using tons of data. That said, Verizon expects the downward trend in ARPU to subside in the second half of the year, as more customers move up the chain to the unlimited plan and opt to spend more.

The second area where Verizon is experiencing costs is in its network. T-Mobile just released data from Ookla showing Verizon's network speeds have declined significantly since it started offering its unlimited data plan. Its peak network speeds fell below AT&T's. While T-Mobile only reported peak speeds, and may not give the full picture of network coverage and average speed, the report is nonetheless a bad indicator for Verizon.

Verizon's branding is all about the quality of its network. If its unlimited data plan cuts into the quality of its network to a noticeable degree, it may not be able continue retaining subscribers at its current rate. That said, Verizon has a lot of cash and more coming in every quarter to invest in its network.

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