Leading telecom carrier, Verizon Communications Inc. (VZ) recently completed LTE deployment in 500 markets, boasting the largest 4G LTE network in the U.S. The company’s LTE network covers nearly 99% of its 3G network areas and caters to over 298 million of the U.S. population.
With the growing demand of LTE services, we believe Verizon’s expansion plans in this space would not only support future growth but will also cement its position as one of the largest wireless providers.
To facilitate LTE deployment, the company remains focused on fulfilling spectrum requirements. The company received approval from the Federal Communications Commission (:FCC) to buy wireless spectrum from SpectrumCo, a joint venture between Comcast Corporation (CMCSA), Time Warner Cable Inc. (TWC) and Bright House Networks) for $3.9 billion in Aug 2012.
To raise funds for this transaction, Verizon struck a deal with AT&T, Inc. (T) to sell 39 lower 700 megahertz (MHz) licenses to the latter. In exchange, Verizon will receive $1.9 billion and Advanced Wireless Services (:AWS) spectrum licenses in five markets. Additionally, Verizon planned the sale of three separate 700MHz spectrum blocks to small rural telecommunication firms.
During the first quarter of the year, the company closed AWS license exchange agreements with T-Mobile USA Inc. and Cricket License Company. We believe the sale of lower spectrum assets and the consequent purchase of new AWS spectrum worked in favor of Verizon. The AWS spectrum holdings will double Verizon’s capacity as well as enable services at a much higher speed and expedite LTE rollout, thereby driving data revenues and boosting its competitive position.
Apart from developing infrastructure, Verizon’s LTE services are also complimented by its wide range of smartphones. Not only have smartphones driven equipment revenues, these are also crucial in enhancing the company’s data service. As of Mar 31, the company’s smartphone penetration increased to 61%. It activated 7.2 million smartphones during the first quarter, of which 28% were of new users.
During the first quarter, the company introduced numerous devices to attract customers to 4G LTE that accounts for over 28% of total retail post-paid connections. The new gadgets include Samsung ATIV Odyssey, the BlackBerry Z10, the Samsung Galaxy Note 10.1 tablet, the Verizon 4G LTE USB Modem UML295 by Pantech, and the Verizon Jetpack 4G LTE Mobile Hotspot MiFi 5510L by Novatel Wireless.
Moreover, the company’s 4G LTE Router – an Internet access gadget compatible with both wired and Wi-Fi-enabled devices – will likely gain popularity in the coming days.
Verizon, currently has Zacks Rank #3 (Hold).
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