Verizon Mulls Price Increase in Response to Rising Cost Pressure

U.S. wireless providers are looking to upsell customers to more expensive monthly plans to help grow revenue, but executives in recent earnings calls acknowledged that inflationary pressures may result in higher prices in the future. Verizon Communications Inc. is considering raising prices for wireless service — one of several possible options to pass along inflation-related costs to consumers following AT&T Inc.’s decision this week to increase rates on older calling plans by $6 or more. verizon prices

Unprecedented inflation will test the abilities of wireless providers to balance the desire for low churn and high postpaid growth with the need to pass along higher production and labor costs.

Verizon CFO Matthew Ellis said energy-related costs for network operations and transportation as well as labor-related costs, including both the direct workforce and third parties, are vulnerable to increasing inflation. If the present forecast of Federal Reserve rate hikes is accurate, he anticipates Verizon’s incremental cash interest impact for the year will exceed earlier expectations of $150 million to $200 million.

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An increase like AT&T’s isn’t likely for Verizon, but alternatives such as the introduction of a higher-priced unlimited plan or added fees are among the possibilities, according to a person with knowledge of the company’s deliberations. Either way, if costs keep rising, Verizon customers will see higher monthly bills.

A Verizon representative declined to comment.

Like many companies, wireless carriers are seeing wages rise. AT&T said in April that pay increases would add a $1 billion or more to its costs. Both Verizon and T-Mobile US Inc. raised employees’ starting pay to $20 an hour in the past few months in response to a tight job market.

Hans Vestberg, Verizon’s chief executive officer, raised the prospect of boosting prices on an April call with investors, citing what he said was a 40-year high in inflation.

“We have plans to be prepared for what it takes,” Vestberg said. “So that will, of course, include different type of cost adjustments, but also looking into what you can do with pricing.”

Not everyone is buying the higher-costs-made-me-do-it rationale. Some are saying ‘I told you so’ after the industry shrank from a four-player field to three when T-Mobile acquired Sprint Corp. in 2020. That left customers with fewer options and made them more captive to their current providers, opponents of that deal say.

“We are skeptical of claims that carriers are raising wireless prices because of inflation,” said Diana Moss, president of the American Antitrust Institute. “It is too easy to blame price increases on such an obvious factor.”

While AT&T broke from past practices and raised prices for the first time in three years, T-Mobile has been holding firm and offering a range of price plans to attract customers from rivals. The company recently introduced new prepaid plans starting at $20 a month.

“Of course AT&T did what it did,” T-Mobile Chief Executive Officer Mike Sievert said during a presentation Wednesday. “This gives us the opportunity to stand up for the customer.”

AT&T’s price increase isn’t evidence of a concentrated market, according to Makan Delrahim, who led the U.S. Justice Department’s antitrust division when the agency approved T-Mobile’s purchase of Sprint.

‘Real Competitor’ verizon prices

The combined company emerged as a “real competitor” to AT&T and Verizon, Delrahim said in an interview. It also empowered Dish Network Corp. as a potential fourth player, he said, with the combining companies selling assets to the new rival.

The overall deal was much better for the consumer,” Delrahim said.

But even T-Mobile isn’t exactly a hero on the price front. The company used to boast that its unlimited plans included all fees and taxes in the advertised price. Today, only the two upper-tier Magenta plans include the extra charges in the posted price, while such items are added on top of the lower-tier plans.

“One big issue that the carriers need to be careful about is doing anything that would appear to increase the digital divide,” said Tammy Parker, an analyst with GlobalData. “They must balance price increases with the need to provide options that allow budget-constrained customers to remain connected.”

The wireless industry this week also saw hints of fresh competition. On Wednesday, Dish launched its 5G service in Las Vegas, a milepost in that company’s nearly two-year journey to become a new wireless competitor after the Sprint/T-Mobile deal.

But it will be years before Dish becomes a major competitor, giving the incumbents a “raise-your-prices-while-you-can” moment, according to Harold Feld, senior vice president of the Washington-based policy group Public Knowledge. verizon prices

 

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