Cell phones pacts are plummeting.
Verizon Communications Inc., the largest wireless carrier in the country, is finding there’s a limit to the number of people who’ll ink two-year contracts.
The company said Thursday that it signed up a net of just 423,000 customers under contract in the first three months of the year – the lowest number in years and below analyst expectations.
Its chief competitor, AT&T Inc., also this week reported a relatively low number of contract customers for the first quarter.
In fact, the New Millennium Research Council recently reported that many cash-strapped consumers nationwide are turning their backs on contracts in favor of cheaper prepaid cell phones.
The group in Washington, D.C., noted that prepaid subscribers accounted for nearly two-thirds of the 4.2 million net subscribers added by U.S. phone carriers in the fourth quarter of 2009.
The New Millennium Research Council is an independent telecommunications and technology think tank.
The era of cell phone penny-pinching is officially here, Jose Guzman, a project coordinator with the group, said in a statement.
Thanks to the recession, the U.S. cell phone marketplace continues to undergo fundamental changes that will just get bigger as the economic downturn deepens.
What is different from a year ago is the explosion in new all-you-can-eat’ and unlimited prepaid deals as low as $30 and $45 (a month) that will remain attractive to consumers long after the current recession is over.
To keep revenue growing, carriers are looking at other avenues. One, ironically, is prepaid service, which is usually cheaper than contract plans and available to consumers without credit. Verizon lost 139,000 prepaid customers under its own brand in the quarter but added 1.3 million through resellers, such as Miami-based TracFone Wireless Inc.
Overall, Verizon said its earnings fell by three-quarters in the first three months of the year, brought down in large part by the one-time tax effect of the health care law.
The New York company earned $409 million, or 14 cents per share, in the quarter, down from $1.645 billion, or 58 cents per share, a year ago.
The results included a previously announced charge of 34 cents per share, to reflect a change in the health care package regarding the tax treatment of benefits.
The Associated Press contributed to this story.