Verizon: No Longer Golden
Jane is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Verizon Wireless (NYSE: VZ) has been known to cost more than AT&T (NYSE: T) and a lot more than T-Mobile, but it represented the gold standard in reliability with its new high-speed data network [4G]. For example, during the fall storm in the Northeast, which had knocked out cellular service for days for the other carriers, it was up all the time. Since businesses rely on wireless, this reputation for holding on against Mother Nature had become its key selling point. Until now.
In December, the carrier experienced three outages for transmitting data. This was worsened by inept customer service, although things were fixed within 24 hours. As The Wall Street Journal reports, "In each case, Verizon offered little explanation for the outages." Now, in reputation for reliability, Verizon doesn't have it over AT&T. It's up to the latter to exploit this. It it does, it can gain market share in providing service for smartphones.
In addition, Verizon, like Bank of America (NYSE: BAC), has decided to impose a little fee. Most of us remember that Bank of America got a bee in its bonnet to impose a $5 monthly fee, beginning January 2012, on the use of its debit card outside its own ATM system. Constituencies, ranging from customers to public officials, pushed back. After all, the nation was still in a severe downturn and the hit would total $60 annually. Bank of America eventually backed down, as expected.
Yesterday, Verizon announced customers will be paying a $2 a monthly fee or $24 annual charge when they pay their wireless bill by phone or on the company's website. The way to get around that would be to pay online through their own banks or send in a check. This goes into effect January 15. In terms of a multi-constitutency push-back and lousy publicity, this could turn into another Bank of America.
Yesterday, Verizon stock closed at $40.05, with a 52-week range for $32.28 to $40.08. That means all these stumbles hadn't affected decisions by investors, at least not yet. After all, servicing smartphones is big business. Verizon Wireless is a joint venture between parent Verizon Communications and Vodafone Group PLC (NASDAQ: VOD).
UPDATE: Verirzon dropped plan to impose the $2 fee, reports THE WALL STREET JOURNAL.
I do not own stock in any companies mentioned.