Of the three major U.S. wireless providers, Verizon (VZ 1.17%) has been having the most trouble winning and keeping customers. Verizon has reported a net loss of wireless retail postpaid phone subscribers in six of the past seven quarters.
Rival AT&T's (T 1.02%) postpaid phone net adds have slowed down this year, but the company is still reliably adding a few hundred thousand net new subscribers each quarter. T-Mobile (TMUS -0.06%) has been doing even better, gaining new subscribers at an impressive clip.
Verizon launched a new set of wireless plans earlier this year collectively called myPlan. The idea was to offer subscribers their choices from a menu of $10 monthly add-ons to the core wireless plans. In theory, the more add-ons a subscriber chooses, the less likely that subscriber will be to switch away from Verizon.
Bundling Netflix and Max
So far, the add-on options have been somewhat limited. The Disney bundle, which includes ad-supported versions of Disney+, Hulu, and ESPN+, is the most notable option. Others include a slightly discounted subscription to Walmart's Walmart+ service and add-ons featuring various Apple services.
On Monday, Verizon announced that it was adding another streaming option to the mix. Its new $10 add-on, which includes ad-supported versions of both Netflix (NFLX -0.63%) and Warner Bros. Discovery's (WBD -2.17%) Max streaming service, will be available on Dec. 7. The price represents a discount of about 40% compared to subscribing to both services independently.
In contrast to Verizon's strategy, T-Mobile bundles Netflix with its two priciest wireless plans without any additional fees. AT&T doesn't bundle streaming services with its wireless plans, but it does offer discounted bundles for those who opt for both its wireless and fiber home internet services.
Comparing wireless plans can be tricky, but one problem Verizon has is that its plans tend to be more expensive than those of competitors. This premium pricing strategy isn't really working anymore. Verizon's Ultimate plan goes for $55 per line with 4 lines before any add-ons. T-Mobile's Go5G Plus plan is $50 per line with 3 lines, and includes Netflix. AT&T's Unlimited Premium plan is $50 per line with 4 lines without any streaming services bundled.
Someone who already subscribes to multiple streaming services could potentially save money by switching to Verizon and taking advantage of both streaming add-ons, but ultimately, the savings aren't very meaningful. A few dollars a month may not be enough to compel many people to switch wireless providers.
Generating cash
While Verizon is struggling to grow its subscriber count, the company is still generating plenty of cash. Through the first nine months of 2023, it grew its free-cash-flow generation by more than $2 billion to $14.6 billion. For the full year, the company expects free cash flow to top $18 billion.
Verizon's ability to extract cash from its massive subscriber base is a positive, but its inability to prevent that subscriber base from slowly eroding is one reason to be skeptical of it as an investment. Verizon stock looks cheap, trading for about 9 times free-cash-flow guidance. But AT&T stock is even cheaper, and it's not having the same problems with subscriber losses.
Verizon's bundling strategy could start to work as its slate of optional add-ons grows. Bundling together Netflix and Max at a significant discount could be an attractive proposition, particularly for consumers tired of managing too many subscriptions. But the price to access that discount is paying for one of Verizon's expensive wireless plans. For many smartphone users, the add-ons may not be compelling enough to offset its premium pricing.
