It’s been a good year for Verizon’s (NYSE:VZ) shareholders, with the stock price up a sizzling 17%. It certainly helps that the company pays a juicy 5% dividend.
Consider that Verizon had to foresight to make substantial long-term investments in its network as well as new products. For example, the company created a smartphone franchise with its Droid offering. And of course, Verizon is now benefiting from its distribution deal with Apple’s (NASDAQ:AAPL) iPhone.
Yet, despite all the success, some risks are rising. And they go to the core of the company’s differentiation as a solid service provider. In December, Verizon had three outages of its wireless data service for its 4G network (based on the so-called LTE system). The latest one came on Wednesday.
So what’s the problem? Verizon has provided vague details, saying that it’s having “growing pains.” But one thing is clear: Customers should not expect any compensation.
The episode is reminiscent of Research-In-Motion’s (NASDAQ:RIMM) earlier outage of its entire BlackBerry platform. Although, in that case, it lasted a grueling three days.
Let’s face it, we’re becoming a “connected” culture, and even a small outage can be a big deal. At the same time, customers have many ways to buzz about their discontent, such as with Twitter and Facebook.
That means it doesn’t take long for a good reputation to go negative — just ask Netflix (NASDAQ:NFLX). This is why companies need to be proactive with bad news. It’s critical. After all, it’s a good bet that more and more people are thinking twice about paying a premium for a Verizon 4G service.
But if this weren’t enough, the company appears to be setting itself up for another PR disaster. Verizon plans to charge its customers a $2 fee for every one-time Verizon bill payment that’s done online or over the phone (it starts on Jan. 15). To avoid this, you can either pay your bill via an autopay program or an old-fashioned check!
Verizon’s Orwellian term for this? It’s a “convenience fee.” Isn’t Verizon paying any attention to recent disasters, such as Bank of America’s (NYSE:BAC) ill-fated attempt to charge a monthly $5 debit card fee?
As we’ve seen this year, great companies can easily fall apart when they fail to understand their customers. While Verizon doesn’t appear to be in the same kind of danger, the recent flubs are definitely a concern — and could provide a way for competitors like AT&T (NYSE:T) to make some inroads.
Tom Taulli runs the InvestorPlace blog “IPOPlaybook,” a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned stocks.
