Verizon LTE Expansion Continues

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Verizon Wireless, a joint venture between Verizon Communications Inc. (VZ) and Vodafone Group PLC (VOD), added 46 new cities to its nationwide LTE network. The company also expanded its coverage in its existing 22 markets.

With this expansion, the company’s coverage will increase to 304 markets, implying more than two-thirds of the U.S. population. This development is in line with Verizon’s target of expanding 4G networks to 400 markets by the end of this year and the entire nationwide 3G footprint by the middle of next year.

The company continued to grow its 4G LTE networks to more cities. The LTE offers mobile broadband download speeds of 5–12 Mbps and upload speeds of 2–5 Mbps.

Verizon Wireless is way ahead of its rivals AT&T Inc. (T), Sprint Nextel Corp. (S) and T-Mobile USA in deploying LTE networks. The LTE coverage of AT&T, the second-largest U.S. mobile service, has reached 41 markets with 74 million Americans. The company expects this number to double by the end of this year and deployment to reach 80% of the U.S. population by 2013.

Sprint, the third-largest wireless operator, plans to launch its own LTE networks in six markets by mid-year and expects to complete the deployment by the end of next year. The fourth wireless provider T-Mobile USA, unit of Deutsche Telekom (DTEGY), plans to upgrade to LTE networks in 2013.

To support its 4G services, Verizon has a rich collection of 4G LTE devices including tablets, dongles, mobile hotspots and smartphones. The recently announced Motorola Droid RAZR MAXX, the Motorola Droid 4, the upcoming Droid Incredible 4G LTE and the Samsung Galaxy S III will further boost its portfolio. Additionally, Verizon recently introduced in-home wireless broadband service “HomeFusion Broadband” based on LTE technology in some rural and remote homes, which do not have access to DSL or cables.

The surging demand for smartphones, tablets and other devices signals a new wave in the industry and opportunities for Verizon to expand. The rapidly growing 4G services will lift the company’s data revenue going forward.

Nevertheless, LTE poses a major risk to Verzion’s wireless segment as the other wireless service providers may delay their deployment of LTE or change their selection and adopt different next-generation technologies, including those that are incompatible with Verizon.

We are maintaining our long-term Neutral recommendation on the stock. Currently, the stock retains the Zacks #2 (Buy) Rank for the short term (1–3 months).

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