The metrics driving Verizon’s turnaround

Good morning. Verizon is starting to show what happens when customer experience becomes a growth strategy.Recommended Video The telecom giant is in the midst of a multi-year transformation toward a leaner, AI-driven model. On the company’s Q1 earnings call Monday, Dan Schulman, chief executive since October, pointed to churn as “the clearest measure” of whether the company’s efforts are resonating. Verizon, No. 30 on the Fortune 500, reported its first positive first-quarter postpaid phone net adds since 2013—a net addition of 55,000 postpaid phone subscribers. Postpaid customers, who pay monthly bills under contract, are considered the most valuable because they carry the largest bills and are less likely to switch providers. Consumer postpaid phone churn was 90 basis points in Q1, a sequential improvement of 5 basis points from Q4, and improved further in March to below 85 basis points. “That is a significant improvement both sequentially from Q4 and within the quarter, and it reversed the upward pressure we had seen in churn over the past several years,” Schulman said. Lowering churn makes Verizon’s “marketing dollars work harder because we are not simply replacing customers who leave; we are adding to a more stable base,” he said. The company is no longer predominantly reliant on expensive promotions to drive growth, instead focusing on a “disciplined, repeatable, and fiscally responsible” approach, he added. Schulman, the former CEO of PayPal and previously Verizon’s lead independent director, succeeded Hans Vestberg. He was charged with steering Verizon’s next phase of customer focus and financial growth. Under Vestberg, Verizon struggled to articulate a clear strategy around market positioning, branding, and pricing, according to analysts. Customer metrics take center stage Schulman highlighted customer-centric metrics: churn, customer acquisition, and customer lifetime value (CLV). These metrics have evolved from marketing roots to become pivotal in finance and the bottom line. “Our cost of acquisition [CAC] and retention in March was down approximately 35% relative to the end of Q4, and we expect to maintain a lower cost of acquisition and retention as we look forward,” Schulman said. “These trends in churn and unit economics are lifting our consumer lifetime value and are already flowing through to the bottom line and to our free cash flow,” he added.Morningstar Equity Director Michael Hodel wrote in an analyst note Monday that although Verizon’s wireless customer churn remains elevated, reflecting the competitive environment, the company is “doing a much better job attracting new customers than a year ago.” Lower pricing has helped drive customer acquisition, Hodel said. Morningstar maintained its $53 fair value estimate and narrow economic moat rating. Telecom CFOs track postpaid net adds, churn, CAC, and CLV as key drivers of revenue guidance and capital allocation. Verizon still lost more postpaid phone subscribers than it gained in the quarter, but only by 35,000, a 321,000 improvement from a year ago, CFO Tony Skiadas said on the call. The gains were driven by a healthier mix of genuinely new customers coming in and fewer existing ones walking out. “While there is more work to be done with customer experience, which is the largest component of our transformation plan, we’re pleased to see early signs of progress towards our goals,” he said. Total operating revenue for Q1 was $34.4 billion, up 2.9% year-over-year.…

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