Starting Feb. 10, customers who sign a two-year contract can get 4 gigabytes of data capacity when they buy a smartphone designed for the 4G LTE high-speed operating standard (LTE is short for long-term evolution, one of several 4G standards). They must also sign up for Verizon’s $30-per-month data plan, and a qualifying voice and text message package, to qualify for the 4GB of data capacity.
To further entice customers Verizon will offer a two-for-one deal on the Motorola Droid 4, a 4G LTE-capable phone. Those clients can choose between the Droid Razr Maxx for $299 with a two-year contract or the Droid Razr 16G for $199 with a two-year agreement.
The phones are designed to strengthen Verizon’s lineup in the 4G fight with AT&T (NYSE:T) by allowing Verizon customers to surf the Web at speeds of 5 to 12 megabits per second on a 4-inch high-definition scratch-resistant screen. Users also can share the carrier’s 4G connection with eight other Wi-Fi-enabled devices. With the addition of the Droid 4, Verizon will have 12 smartphones in the 4G category.
To boost so-far disappointing tablet sales, Verizon is offering $100 off any 4G tablet with the purchase of any basic phone or smartphone. And in an attempt to spur upgrades among basic feature-phone-user holdouts, the carrier is offering a $30 in-store gift card to existing customers who trade in their feature phone – preferably for a data-using smartphone.
Beyond texting and the iPhone
It may look as if Verizon is giving away the farm with these promotions, but they could result in big revenue gains for the carrier if customers take the bait. 4G phones fit into Verizon’s strategy of steering customers to profit-rich data services as profits from voice and text messaging services fall victim to lower usage; cheaper, all-inclusive plans from Sprint (NYSE:S), the pay-as-you-go prepaid service Straight Talk, and free services such as Skype.
Although Verizon signed up more smartphone users and said its data revenue grew 22.2% year over year during 2011, the numbers still disappointed investors. And Verizon needs to show them that its data-service strategy won’t be sabotaged by demand for Apple’s (NASDAQ:AAPL) iPhone, which Verizon sells at a discount.
Verizon’s latest promotions will likely capture the attention of customers who favor bandwidth-heavy functions such as video and music streaming, and those who send lots of large files and play games online. The Droid 4’s large screen and 8-megapixel front-facing camera will also appeal to smartphone users who like to use the device to read, shoot video, and video chat. The smartphone also has a 1.2-gigahertz processor and 16-gigabytes of storage in a slim, attractive design.
The Droid 4 phone’s strong battery, however, cannot be removed by the user, a limitation that may turn off some customers. Women also may balk at the phone’s wide frame, and there are many customers who won’t give up their iPhone, regardless of what the competition has to offer. What’s more, data plans are a significant extra expense, so the promotions may not be enough to entice users who already have a hard time footing the bill for basics on Verizon’s expensive network, especially if they can get cheaper plans from, say, T-Mobile’s growing assortment of 4G offerings.
Nonetheless, Verizon has more to gain than lose with these promotions, and that makes them worth the effort.