Verizon (VZ 1.03%) has, by far, the most loyal customers among the big three wireless carriers, but that could soon change.

Research compiled by Evercore ISI analysts found Verizon's net loyalty intent remains significantly elevated over rivals T-Mobile (TMUS 0.18%) and AT&T (T 1.61%). Net loyalty intent measures the difference in the percentage of customers planning to leave a carrier versus those planning to stay. Verizon's customers remain loyal even after it pushed through a price increase last summer, and its network advantage has disappeared in the 5G era.

But that loyalty may be about to disappear with the growing adoption of a new piece of technology: eSIMs, which remove the need to put a new physical SIM card in your phone to switch carriers.

Why Verizon customers chose Verizon in the first place

Verizon built its customer base on the back of a leading network for the past 20 years or so. ("Can you hear me now?") That means many Verizon customers subscribe because they want the assurance of a reliable network. They're less sensitive to price and more risk averse, the Evercore analysts point out.

Verizon saw its subscriber churn rate climb in the third quarter after raising rates this summer. Management noted the financial impact of the pricing action greatly outweighed the customer losses it incurred. What's more, it managed to push churn rates back down in Q4, a period where churn typically increases quarter over quarter. That's better than AT&T, which saw churn remain flat from Q3 to the Q4 after its own summer price hike.

But the grumblings are growing.

Price-sensitive customers are fleeing Verizon in search of better values. That's most evidenced in its prepaid subscriber losses, which totaled 445,000 in 2022.

Furthermore, while Verizon continues to tout the reliability and strength of its network, T-Mobile's marketing team has been doing a good job of changing people's perceptions. T-Mobile CEO Mike Sievert said Verizon's lead in network perception had been cut in half over the last three years.

Still, it makes sense that Verizon customers are the most hesitant to try another carrier. But if trying out a new carrier was as easy as downloading a new app, they might be willing to test it out.

Lowering friction

The growth of eSIM makes it easier for customers to switch, and that's bad news for Verizon.

eSIM is a software replacement for the physical SIM cards you used to need for your phone to connect to a wireless network. And a user can have multiple eSIMs installed on their phone at the same time. More and more phones are shipping with eSIM capabilities, and the iPhone 14, for example, doesn't even have a physical SIM tray.

T-Mobile is ready to take advantage. It started offering Network Pass in August last year, which gave people the ability to try T-Mobile's service for 90 days. All they had to do was click a few buttons in the T-Mobile app, and they received an eSIM (if their phone wasn't locked to their current carrier).

"Everything that removes switching friction in this industry, and eSIMs are one of them, it's good for us because we're a net share taker," Sievert said at an investor conference in December.

Increasing the amount of switching is important for T-Mobile because the outlook for 2023 across the industry is for fewer gross additions in postpaid wireless. Lowering the hurdles and decreasing the risk of trying another network should benefit T-Mobile. Conversely, Verizon likely wants to keep customers locked into its network as much as possible.

But Verizon is also moving away from device promotions that could lock customers into their plans for as long as 30 months. It's focused mostly on high-value customers, but those customers are becoming less satisfied.

As switching friction decreases, Verizon is likely going to continue struggling to expand its subscriber base. And even if it can raise the average amount they pay, it's going to result in sluggish revenue growth no matter what.