Verizon Wireless to refund $90M in improper charges; Wall Street yawns
FCC probe prompts company's decision to repay customers
Over the weekend Verizon Wireless announced it will pay up to $90 million to 15 million customers who incurred data charges even though they didn't have data plans.
You might think that news of the refunds -- coming under pressure from the Federal Communications Commission, despite Verizon Wireless's flimsy attempt to make is sound like the company merely was correcting an error it noticed as it "reviewed customer accounts" -- might concern investors at least a little, as in "Is this the tip of the iceberg?"
Not a chance. In fact, shares of the two companies that co-own Verizon Wireless -- Verizon Communications (NASDAQ: VZ) and British-based Vodafone Group (NASDAQ: VOD) were doing fine in early trading Monday. VZ was up 23 cents to 33.12 by late morning, while VOD had gained 7 cents to 25.37. Further, both stocks currently are near 52-week highs.
So why the utter lack of concern on Wall Street over what could end up being nearly a $100 million payback to customers, and potential FCC fines? Because that amount of money is loose change in Verizon's parking lot. In other words, it doesn't matter. As a percentage of revenue, $90 million is less than one-third of 1 percent of Verizon Wireless's Q2 revenue of $26.8 billion. Why would losing that piddling amount of money -- which, by the way, PC World says is "being called one of the largest customer refunds in history" -- from Verizon Wireless coffers bother any sane investor?
Not only that, the FCC essentially approved Verizon's announcement, despite noting that it would "continue to explore" the issue.
“We’re gratified to see Verizon agree to finally repay its customers,” said Michele Ellison, Enforcement Bureau Chief at the commission. “But questions remain as to why it took Verizon two years to reimburse its customers and why greater disclosure and other corrective actions did not come much, much sooner.”
Does she really have to ask those questions of a company so committed to doing "the right thing for our customers" that last year it doubled the early termination fee for smartphone customers to $350?