Well perhaps saying that I’ll NEVER own Verizon stock is a bit extreme, but Verizon definitely has a lot of work to do in order to win me back as a customer and a potential shareholder.
This analysis will be very light in terms of providing a fundamental or financial analysis of Verizon. I will just mention that they pay a very attractive dividend (currently 4.6%) and Verizon’s dividend has increased for 10 consecutive years. They also have decent earnings growth (but not great) over the past 5 years. So what’s not to like?
I can point to a couple of financial issues that I have with Verizon such as high debt and low dividend growth rate, but my main issue is with their horrible customer service and poor business decisions. I’ve been meaning to write about this for a while but I wanted to wait until my feud with Verizon was over.
In the meantime, a fellow Verizon hater wrote a nice SeekingAlpha article on VZ being too aggressive with their pricing. Since Mr. Rayburn covered this topic well in his article I’ll skip the pricing issues. The sad part is I still have plenty to talk about.
In this post, I will focus on my personal experience with Verizon’s services and why I believe they will lose a substantial number of customers in the future.
Verizon Wireless Saved My Life
Huh? If Verizon saved my life why won’t I buy their stock?
Verizon has two main services that I have used – wireless and FIOS (internet and cable tv). One of these services is incredible while the other is clearly run by greedy morons who have no concept of arithmetic (more on this later). Can you tell I’m angry? But before I begin my rant, I want to be fair and include the good aspects of Verizon – and that is their wireless service.
I have been a Verizon Wireless customer since November, 2000. Shortly after joining VZ I went on my monthly trip to the Wonderland of Rocks in Joshua Tree National Park with a few friends; all of whom had different cell phone carriers. Before starting our climb we would always point to a rock in the distance and set it as our target destination for the day. On this particular day we decided to go for a challenge and picked one of the highest, most distant rock outcroppings.
The picture really doesn’t do it justice but I can tell you it was a few miles of difficult bouldering. It took us a good 7 hours to make it to our destination. While enjoying the scenery at our destination I began to feel nauseous and started throwing up uncontrollably. This went on for about 20 minutes and I finally decided to head back down to the car.
After taking a few steps my legs started wobbling, I got really dizzy and I fell to the ground. Even with 6 jackets covering me I was freezing. There was no way I was going to get down to the parking lot and my friends couldn’t carry me while navigating the difficult terrain. Our only option was to call for help.
All of my friends tried their cell phones but they didn’t have reception. Finally they found my phone in my backpack and they were able to get a signal. The helicopter arrived about 20 minutes later and I was airlifted (unconscious at this point) to a nearby hospital.
The doctors informed me that I had food poisoning and I wouldn’t have lasted much longer out there. Who knows what would have happened if I didn’t have Verizon with me on that trip.
In addition to this Joshua Tree story, I encounter people almost daily who are amazed that I have service at work, in basements of large buildings, hikes, etc. If Verizon Wireless was the only business Verizon ran I would not only be a shareholder, Verizon stock would be one of my core positions! Unfortunately that is not the case…
Verizon FIOS Tried To Ruin My Life
Or at least my credit.
I made the switch from Time Warner Cable (TWC) to Verizon FIOS back in 2012. When I returned my equipment to TWC the employee said “You’ll be back.” I should have listened…
FIOS lured me in with a flashy ad for their Triple Play Bundle which included a nice cable tv package, high speed internet and home phone for just under $100. We don’t use a home phone so that was of no value to us but we figured this was still a great deal. We jumped on it.
Then we added boxes for all of the televisions we own, HBO because we HAVE to have Game of Thrones and of course taxes and all of a sudden we were at $170 per month! I know all of you people living a frugal lifestyle cringe at that number. Looking back on it now so do I. In fact it almost makes me cry. But enough about the (insane) pricing – there is nobody to blame but myself for paying that much, and we are not here to discuss my stupidity.
Ignoring the IBM share that I was paying every month for FIOS, I was very pleased with the service for a few months. Then they started bombarding me with advertising. As if they weren’t making enough money off of me, now I basically get slow-to-load advertising every time I turn on my tv. This progressed to happening every time I hit the guide button to finally EVERY TIME I PUSHED A BUTTON! As I mentioned these ads were slow to load and sometime even froze the system, greatly hindering my ability to enjoy watching tv.
Next up were the internet issues. At the time these issues started I was day trading Emini S&P500 futures contracts. Definitely not a good time to have spotty internet. I was forced to halt my trading activity until the issues were resolved. This took a couple of weeks and FIOS customer service was not helpful. I made numerous hour-long calls that resulted in the exact same response – “Try turning off your router for a few minutes and then reboot the router.” Seriously?
When I asked to be transferred to a supervisor they would all say “have you tried rebooting the router?” Apparently this is the extent of training Verizon FIOS employees receive. Finally a technician comes up with the brilliant idea to try rebooting the system remotely using his computer. No go. I finally gave up on FIOS customer service. Luckily the issue eventually resolved itself. Still I had to trade with the possibility of an internet outage in the back of my mind. Quite stressful…
Cable TV Failure
This was the last straw. All of a sudden I could not get any channels. I called customer service and 2 hours later they determined that there was an issue with my router. Now this is the kicker – they expected me to pay $80 to replace the router PLUS a fee for the technician to come out!!!
Please keep in mind that the router is basically a rental. I made sure to point out the fact that I did not damage the router and they agreed that the router issue was not my doing. Yet they still expected me to pay $80 to replace it.
I spent hours trying to get several FIOS employees to understand logic and reason to no avail. They were firm on the $80 charge for the router. Finally I gave up and told them to cancel all of my services. The rep informed me that I would have to pay $150 to break my contract and I said I don’t care.
The FIOS employee responded with a surprised tone, “so you are willing to pay a $150 fee to break a contract over an $80 charge?”
My response, in an even more surprised tone, was “you are willing to lose out on a customer paying $2000 per year over an $80 charge?!?” Silence on the other end. Whether or not logic finally set in at this point does not matter. Verizon still refused to budge. I broke my contract and was finally free from cable.
Sent To Collections
Oh but the story doesn’t end there. I paid my $150 fee, returned all of my equipment and I asked repeatedly if my balance was paid in full. They assured me that there was no outstanding balance and my account was closed.
A couple of weeks ago I got a surprise in the mail informing me that I am delinquent on a Verizon FIOS bill and I’ve been sent to collections. I don’t think I need to explain how furious I was. As I mentioned above I made sure my balance was paid in full. On top of that, FIOS made no attempt to contact me by phone, email or mail to let me know that I owed them money. They decided to send me straight to collections.
I called the collection agency and demanded an explanation. They informed me that Verizon FIOS attempted to contact me via messages in my FIOS account. Oh really? The account that was CLOSED recently? The one that I don’t have access to anymore?? Unbelievable.
What if the collections letter was lost in the mail? My credit would have taken a big hit. I’m in the process of buying a house right now. Perhaps I wouldn’t have qualified for the loan. Luckily I cleared it up in time and I can finally say that I’m done with Verizon FIOS.
So I had a horrible experience with one of Verizon’s services. Is that really a good enough reason to stay away from Verizon stock? Let’s do some simple math that is apparently beyond the capabilities of Verizon management.
Say Verizon FIOS was staffed with competent employees that treated me right. They would have replaced my router free of charge and I would have remained a customer paying $170 per month.
$170 per month x 12 months = $2040 per year
Say I remained a customer for 10 years: $2040 per year x 10 years = $20,400
$20,400 – $80 (router) = $20,320
That’s over $20k in future income Verizon lost from ONE CUSTOMER because of a poor business decision. Now I think it’s fair to assume that this, or something similar, will happen to other Verizon FIOS customers. As of March 31, 2015 there were over 5.7 million FIOS subscribers. That’s a lot of people Verizon can potentially piss off.
Although FIOS subscriptions continue to increase each quarter, the subscription rate is decelerating. My sense is that Verizon is able to attract a lot of new subscribers with great looking promotions, but once people actually experience the service they leave. The ones that stay do so because they have no other options.
Impact On Personal Finances
Their loss is my gain. Sure I paid $150 to break my contract, but let’s see what I’m saving.
- Time Warner Cable high speed internet: $65 per month
- Netflix: $8 per month (also paid for this when I had FIOS)
- MLB.TV: $120/year ($10/month)
- Total: $83 per month
My entertainment expenses have gone from $178 per month to just $83 per month, a savings of $1,140 per year! I don’t even notice that cable is gone with all of the great programming on Netflix and with almost every single baseball game available to me.
Cutting cable was one of the best decisions I have made so I suppose I should thank Verizon FIOS for pushing me into it. I strongly believe that many people will cut cable in the future, especially if they are not at all satisfied with their cable provider. This, combined with FIOS customers switching to better cable providers (if available), in my opinion will greatly diminish Verizon’s revenue and their stock price.
6/18/2015 UPDATE: KINGRAYRAY14 just notified me via StockTwits that Verizon intends to sell all wireline assets including copper lines and FIOS, and that they want to be a wireless company exclusively. As I mentioned throughout the article I love Verizon’s wireless business. I stated that if wireless was their only business then VZ would be one of my core holdings. So if Verizon follows through with what KINGRAYRAY14 said and they ditch FIOS, “never” buying VZ will turn into buying VZ very soon. I’ll keep a close watch on the company for now.
Has anyone else used Verizon FIOS? What is your experience with them (good or bad)? Does anyone think VZ is a good buy right now? Please let me know in the comments section below.
Full disclosure: None